Vodacom trading update is decent

We saw a Vodacom trading statement after the bell yesterday, these are for the full year numbers to March 2012, which are expected to be released on the 21st of May. Basic EPS is expected to be 20 to 25 percent better than the prior years 561 cents, so expect the range to be between 673 to 701 cents per share. Headline earnings per share are expected to be between 5 and 10 percent higher to be between 689 to 722 cents. Nice, that looks like decent enough growth for a company that was supposedly "ex-growth" with a mature market here in South Africa. This is the shift from voice to data, albeit at lower margins, people are going to consume a whole lot more data on their newer and fancier handsets. Even at the lower end, phones are going to become smarter. But is the stock expensive at one hundred and seven and a half Rands? Let us explore this later. Byron always tells me that an iPhone consumes three times more data than comparable smart phone users. Either the iPhone is more intensive in terms of data usage, or/and easier to use.

With basically an 80 percent payout ratio, you should/could expect 295 cents for the second half, bringing your total for the year to around 555 cents worth of dividends. So, the ratios for the fundamentals junkies looks as follows: 14.9 times earnings at the TOP end of the range and a dividend yield of just more than 5 percent. Factoring in the dividend tax of course, around five percent yield is very juicy. And that, I think is the part that attracts the international investors to Vodacom, because you can bet that Vodafone, the 65 percent shareholder (and the South African government, who own 13.91 percent) will want to extract as much as they can. One could on that basis expect the payouts to continue to be high, and as such perhaps the stock will continue to attract a higher valuation. I guess when government bond yields (on the "safer" bonds) start to tick up, then this "endless search for yield" might actually change. Until then though.