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Vodacom’s share price increased by 50% – from 5400c to its current 8130c – over the past year. The company also paid a generous dividend of 355c/share, or 6,5% on the share price of a year ago. MTN’s share price went up by 42% – from 9800c to its current R140. Over the past year both also declared handsome dividends of 500c/share, or just more than 5% of the buying price of a year ago.
The share prices of both MTN Group [JSE:MTN] and Vodacom Group [JSE:VOD] fared significantly better than the Satrix 40, whose share price increased by only around 20% over the past year, while its dividend of just under 3% was nothing to write home about.
Those are the basic facts. But what lesson can we learn from them? Both Vodacom and MTN have a licence to print cash. No, let’s rather say both have the capacity to produce massive cash flow. Both are in the business of communication, data and mankind’s apparently insatiable need to chat – either verbally or in writing, it makes no difference.
Both are also something of a status business. Very few of today’s smart young things would be satisfied to be seen in the street or in a shopping mall with an ordinary old Nokia like mine, on which you can talk, send SMSs and now even take photographs – but that’s all. Even primary school children and their mothers and grandmothers I see every day when I pick up my grandchild from school are now using far more formidable communication instruments than my modest old Nokia.
For both shares that means two things: both Vodacom and MTN are excellent growth shares, with their businesses in the right sector. Both also pay fat dividends. The analysts say even if you buy their shares now at their current prices the total dividend yield over the next three years will be around 5%/year.
An investor doesn’t often have the opportunity to invest in a combined growth and dividend share. But Vodacom and MTN are such shares. Buy both. Over the short term the annual dividend will pay for your family’s nattering. Over the long term their growth will provide for your retirement.
The share prices of both MTN Group [JSE:MTN] and Vodacom Group [JSE:VOD] fared significantly better than the Satrix 40, whose share price increased by only around 20% over the past year, while its dividend of just under 3% was nothing to write home about.
Those are the basic facts. But what lesson can we learn from them? Both Vodacom and MTN have a licence to print cash. No, let’s rather say both have the capacity to produce massive cash flow. Both are in the business of communication, data and mankind’s apparently insatiable need to chat – either verbally or in writing, it makes no difference.
Both are also something of a status business. Very few of today’s smart young things would be satisfied to be seen in the street or in a shopping mall with an ordinary old Nokia like mine, on which you can talk, send SMSs and now even take photographs – but that’s all. Even primary school children and their mothers and grandmothers I see every day when I pick up my grandchild from school are now using far more formidable communication instruments than my modest old Nokia.
For both shares that means two things: both Vodacom and MTN are excellent growth shares, with their businesses in the right sector. Both also pay fat dividends. The analysts say even if you buy their shares now at their current prices the total dividend yield over the next three years will be around 5%/year.
An investor doesn’t often have the opportunity to invest in a combined growth and dividend share. But Vodacom and MTN are such shares. Buy both. Over the short term the annual dividend will pay for your family’s nattering. Over the long term their growth will provide for your retirement.
