Vodafone Group Plc (ADR) (VOD): Is It Worth 160 Pence or 240 Pence?

With no control over Verizon Wireless, Vodafone’s strength is also a weakness. If things turned nasty, we could see a return to Verizon Wireless’s “dividend strike.” With cash flow choked off, Vodafone’s own dividend — which underpins its attraction — would be compromised.

The strength of Verizon’s hand means Vodafone Group Plc (ADR) (NASDAQ:VOD) shareholders are unlikely to see the equivalent of a 240 pence valuation. That would be the top-dollar solution. Indeed, the three-way breakup talk might be a tactic to unsettle Vodafone’s management.

But it would be an embarrassing failure for Verizon’s CEO Lowell McAdam if he didn’t seal a deal this year. With estimates for Vodafone’s share of the joint venture in the ballpark of its own market cap, Vodafone could get a price that is well above its recent 160 pence, even after a $10 billion to $20 billion tax bill.

Juicy yield
So I’m happy to hold Vodafone Group Plc (ADR) (NASDAQ:VOD) at around 190 pence, enjoying the juicy yield and in the expectation that there will be further upside this year. But I wouldn’t buy at this level in the hope of a quick gain, and I wouldn’t be surprised to see the shares fall back as bid rumors go quiet.

The article Is Vodafone Group (LSE:VOD) (NASDAQ:VOD) Worth 160 Pence or 240 Pence? originally appeared on Fool.com and is written by Tony Reading.

Fool contributor Tony Reading owns shares of Vodafone. The Motley Fool recommends Vodafone.

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