Vodafone pockets 2.1bn pounds from VZW dividend

Telecoms giant Vodafone has announced that it is to receive over two billion pounds via a dividend from its stake in its US wireless joint venture with Verizon.

Verizon Wireless (VZW), which has been at the centre of takeover rumours by Verizon for months, is paying a total of $7.0bn (£4.6bn) to shareholders at the end of June.

Vodafone, which owns 45% in VZW, will receive $3.2bn (£2.1bn), while Verizon will pocket the rest.

The UK telecom said it will update the market on how it plans to use the proceeds in its full-year results later next week (May 21st), though it had used the cash to buy-back shares previously.

An article in The Sunday Times this weekend claimed that Vodafone would not retain its policy of growing its own core dividend next week. The paper highlighted a growing dependency by Vodafone on its dividend payment from VZW.

According to analysts at Berenberg: "The debate over the company's ability to support underlying dividend growth has been going on for some time now, with only a few analysts now expecting dividend growth for FY14 onwards.

"The reality is that, without the Verizon Wireless dividend, Vodafone's core dividend is only just covered by earnings from its consolidated operations, leaving limited scope for the company to be generous."

Shares in Vodafone have raced higher since the start of the year on speculation that Verizon could offer to buy-out its 45% share in VZW for somewhere in the region of $100bn, though the group is thought to want a much higher price.

The stock has gained over 25% in 2013 so far.