Investors like growth and they like dividends. So why isn't Vodafone on a premium rating?
The global mobile phone operator hasn't just forecast high single-digit growth in sales next year. It also expects to hold its profit margins and to freeze its capital expenditure. That should allow it to increase an already attractive dividend.
Yet its shares trade on a forward P/E ratio of just 13. That's about the same rating as the broad UK stock market.
A fear of falling
Investors seem to be preoccupied with two risks. One is that Vodafone won't be able to sustain its growth for long. The other is that its profit margins will actually fall.
Vodafone's growth forecasts depend on its winning new customers, rather than squeezing more revenue out of existing ones....
