Vodafone is to hike its dividend for the first time in eight years as the benefits of a massive restructuring come through quicker than expected.
Shares in the mobile phone giant rose nearly 5p or 5.5% to 93.8p in early trading as it confirmed that the dividend for the year ending in March will be increased by 2.5%. The interim dividend was left unchanged at 2.25 Euro cents.
Vodafone last hiked its payout to shareholders in 2018 but slashed it from 15.07cents to 9cents after making heavy losses in 2019. The full year dividend was cut again to 4.5 cents last year
Vodafone has historically been one of the FTSE 100’s biggest dividend payers so news of an increase after nearly a decade will be widely welcomed by its legions of smaller shareholders.
Confirmation of the new dividend policy came as Vodafone delivered solid first half financial results and said full year profits are expected to be at the “upper end” of the guidance range for investors.
First half revenues grew by 7.3% to €19.6 billion (£17.3 billion) as all Vodafone’s major territories returned to growth and the benefits of the merger with rival operator Three UK, began to flow through.
While underlying first half earnings were up 5.9% to €5.7 billion, pre-tax profits were barely changed at €2.11 billion.
Vodafone’s biggest market Germany, returned to growth in the second quarter with a 0.5% revenue rise.
The UK saw 1.2% growth and group CEO Margherita Della Valle said Three UK integration benefits were being delivered with “better speeds and better coverage” for customers.
More than 5,000 sites have already been upgraded enabling Vodafone and Three customers to seamlessly use both networks. By the end of the year Vodafone will have removed 16,500km2 of coverage 'not spot' areas.
Della Valle said: “Whilst we have more to do, we delivered good strategic progress in the half year, driving further operational improvements across the business, expanding our customer satisfaction initiatives, and making a fast start in integrating the Vodafone and Three networks in the UK.
“Based on our stronger performance, we are now expecting to deliver at the upper end of our guidance range for both profit and cash flow, and as our anticipated multi-year growth trajectory is now under way, we are introducing a new progressive dividend policy, with an expected increase of 2.5% for this financial year."
Chris Beauchamp, chief market analyst UK at investment and trading platform IG said: "The stars are finally aligning for Vodafone, and investors could be forgiven for feeling euphoric about the improved trading outlook and a boost to the dividend.
“While there should be some short-term worries about the health of the German economy, there is plenty of reasons to think that the 12-year share price decline has finally been brought to an end."
© The Standard Ltd