Vodafone announced a dividend cut to help reduce debt and fund growth investments.
Vodafone (LSE:VOD) shares traded higher, up nearly 5% to 73.40p, as shareholders shrugged off any disappointment of a dividend cut.
Instead, the market welcomed what was described as a pragmatic move that would help the telecoms firm pay down debt and make new investments aimed at unlocking growth.
“While painful, the cut looks a sensible move,” said Russ Mould, investment director at stockbroker AJ Bell.
It is expected that the divi cut will enable around €1 billion of debt to be reduced per year, albeit standing at €33.2 billion that debt pile remains substantial.
“From a share price perspective, less debt means less risk and less risk can mean a higher share price, or at least persuade investors to pay a higher multiple to access a company’s earnings and cash flow, all other things being equal.”
