Broker: Verizon Wireless income to boost Vodafone dividend - Mobile World Live

Broker: Verizon Wireless income to boost Vodafone dividend

09 JUL 2012

Shareholders in Vodafone can reportedly expect bumper dividend payouts over the next few years as the UK group benefits from rising contributions from its US subsidiary, Verizon Wireless.

The Guardian newspaper cites analysis by broker Liberum Capital, which estimates that Vodafone could receive £3 billion from Verizon Wireless this financial year and up to £4 billion by 2016. Vodafone is thought likely to plough 75 percent of the taking into its dividend, translating into a 15 percent rise in the dividend to 4.6p this financial year, Liberum says.

The US subsidiary’s majority parent, Verizon Communications, resumed payments to Vodafone last year following a six-year hiatus. This resulted in a £2.8 billion taking for Vodafone, of which £2 billion was distributed to its shareholders via a 4p dividend in February.

"We expect news shortly that the payment will be repeated at a higher level," wrote Liberum analyst Lawrence Sugarman. "Verizon has material scope to increase its dividend going forward, and crucially, because of the need to fund the Verizon group dividend, has a significant incentive to pay one."

Verizon Wireless suspended its dividend in 2005 in order to pay down debt, but the US number-one operator is now thought to be generating US$1 billion cash every month on the back of rapidly growing revenues. 

The operator is 45 percent owned by Vodafone, and 55 percent by Verizon Communications.