The Vodafone (LSE: VOD) share price has fallen once more, and it’s down 55% up to now 5 years.

That’s regardless of the telecoms big’s transformation plan. And a €500m share buyback introduced on 14 November hasn’t given Vodafone shares the kick I assumed it would. Not less than, not but.

What must occur for the share price to begin climbing once more?

Path to development

Let’s remind ourselves what the corporate’s new focus is all about:

We’ll simplify our organisation, reducing out complexity to regain our competitiveness. We’ll reallocate sources to ship the standard service our prospects anticipate and drive additional development from the distinctive place of Vodafone Enterprise. — CEO Margherita Della Valle, Could 2023

That features reducing the dividend in half. And I’m wondering if that could be sending blended messages.

The money isn’t there to maintain paying these earlier large dividends. However out of the blue there’s sufficient spare to splash out €500m on shopping for again shares?

Good sense

I can see why buyers could be confused. However I believe it’s a smart transfer.

I like the businesses I part-own to pay progressive dividends supported by earnings cowl, which Vodafone’s weren’t. After which to pay out spare money as buybacks, which will help keep away from setting up dividend expectations that earnings simply can’t help.

Perhaps fears of additional dividend cuts are additionally serving to to carry again the price.

It’s occurred earlier than, the place an organization’s first-stage cost-cutting wasn’t sufficient and the pruning shears got here out once more.

Outlook

Even with the reduce, there’s nonetheless a 6.7% dividend yield on the playing cards. And after I take a look at dividend forecasts and at predicted cowl by earnings, I like what I see.

Analysts anticipate the dividend to stay flat till at the very least 2027, which appears truthful sufficient to me. And with earnings per share (EPS) predicted to develop, we might see the dividend coated 1.6 occasions this yr, rising to 2.1 occasions by 2027.

The issue is, I believe many buyers will wish to see some precise earnings development earlier than they’ll consider that the brand new dividend plan will work. That features me.

Earnings on monitor?

It’s exhausting to learn a lot into H1 outcomes this yr, as we’re evaluating with a reported loss per share within the first half final yr. Vodafone rated its adjusted EPS determine as 30% forward.

That’s a superb begin, however we’d want to attend till FY ends in Could 2025 to get a correct deal with on the restoration. A Q3 replace in February might present hints although.

So what concerning the share price? Brokers have a mean goal of 91p on the shares, up simply 28% from the price on the time of writing. That degree might imply a price-to-earnings ratio of solely 9 based mostly on 2027 forecasts.

One for dividend buyers?

Proper now, I believe Vodafone needs to be of most curiosity to revenue buyers and is price conserving a watch one. It’s on my watchlist for sustainable dividend candidates for positive.

I simply don’t but know if the restoration plan’s phrases will flip into money.