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Vodafone Group Plc (ADR) (VOD) Why This Company Beats BT Group plc (ADR) (BT)

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LONDON — Over the coming weeks, I’ll be taking a look at the biggest and best companies in the various FTSE 100 sectors. Today it’s telecoms, and that means just two big players — Vodafone Group Plc (ADR) (NASDAQ:VOD) and BT Group plc (ADR) (NYSE:BT).

Vodafone Group Plc (ADR) (NASDAQ:VOD)

Here’s a quick summary of some fundamentals:

Vodafone

Year to March EPS P/E Dividend Yield Cover
2008 12.56 pence 12 7.51 pence 5% 1.7 times
2009 17.17 pence 7.1 7.77 pence 6.3% 2.2 times
2010 16.11 pence 9.4 8.31 pence 5.5% 1.9 times
2011 16.75 pence 10.5 8.9 pence 5% 1.9 times
2012 14.91 pence 11.5 9.52 pence 5.5% 1.6 times
2013 (forecast) 15.18 pence 12.3 10.35 pence 5.5% 1.5 times
2014 (forecast) 16.50 pence 11.3 10.82 pence 5.8% 1.5 times
2015 (forecast) 17.52 pence 10.6 11.08 pence 5.9% 1.6 times

That steadily rising dividend is nice, and the consistently high yield suggests the share price has not kept pace with the true valuation of the company.

High dividends aren’t guaranteed, and a company might have to cut its payout if earnings are not sufficient. And to that end, it’s perhaps a little concerning that Vodafone Group Plc (ADR) (NASDAQ:VOD)’s dividend cover has fallen a little. But forecasts suggest it is stabilizing.

BT

Year to March EPS P/E Dividend Yield Cover
2008 23.90 pence 9.1 15.8 pence 7.3% 1.5 times
2009 16.00 pence 4.9 6.50 pence 8.3% 2.5 times
2010 17.30 pence 7.2 6.90 pence 5.6% 2.5 times
2011 21.00 pence 8.8 7.40 pence 4% 2.8 times
2012 23.70 pence 9.6 8.30 pence 3.7% 2.9 times
2013 (forecast) 24.95 pence 11.2 9.43 pence 3.4% 2.6 times
2014 (forecast) 25.34 pence 11.0 10.67 pence 3.8% 2.4 times
2015 (forecast) 27.01 pence 10.3 12.09 pence 4.4% 2.2 times

BT has been recovering well since 2009, but though it is growing earnings quite nicely, dividend yields have been falling.

Which is best?
BT Group plc (ADR) (NYSE:BT)’s third-quarter figures saw revenue fall by 6%, and some of that is because BT Group plc (ADR) (NYSE:BT) is mainly dependent on just one market — around three-quarters of its business is done in the U.K., where competition is strong and saturation levels are high.

Vodafone Group Plc (ADR) (NASDAQ:VOD), on the other hand, gets only around 12% of its turnover from the U.K., has a good presence in the developing market of India, and holds a 45% stake in Verizon Wireless in the US.

About 10% of BT Group plc (ADR) (NYSE:BT)’s turnover comes from Europe (excepting the U.K.), whereas Vodafone Group Plc (ADR) (NASDAQ:VOD) gets close to 60% of its revenue from the wider eurozone area. That greater international clout helps Vodafone in capturing multinational contracts — like the recent deal to supply Germany’sThyssenKrupp, and a new partnership with Poland’s Polkomtel.

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