Vodafone Group PLC (LSE:VOD) shares topped the FTSE 100 leaderboard on Tuesday as the company said it would increase its dividend for the first time since 2018 and expects to hit the upper end of its full-year guidance for earnings and cash flow.
Results for the telecoms giant's half-year to 30 September showed underlying earnings excluding lease expenses (EBITDAaL) of €5.73 billion, up 5.9% versus a year ago and slightly ahead of the average analyst forecast of €5.65 billion.
Revenue rose 7.3% to €19.61 billion, broadly in line with forecasts. Second-quarter service revenue increased 8.1% to €8.47 billion, ahead of the €8.26 billion expected, with a return to growth in Germany and service revenue growth in the UK of 1.2%.
Net debt fell to €25.94 billion from €31.78 billion a year ago, below analyst forecasts of €27.19 billion.
The company now expects to deliver full-year earnings and free cash flow at the top end of previously guided ranges. EBITDAaL is now seen coming in at €11.3-11.6 billion, with €2.4-2.6 billion of cash flow.
Chief executive Margherita Della Valle said: "Following the progress of our transformation, Vodafone has built broad-based momentum. In the second quarter, we saw service revenue accelerating, with good performances in the UK, Türkiye and Africa, and a return to top-line growth in Germany.
She said that because the group's "anticipated multi-year growth trajectory is now underway" the board is introducing a new progressive dividend policy, with an expected increase of 2.5% for this financial year.
This reverses a change made in 2019, when the company made front-page headlines after cutting its dividend and ditching a progressive payout.
Analyst Richard Hunter at Interactive Investor said: "The direction of travel should provide some relief. A progressive dividend policy will build on the current yield of 4.4%, while the €4 billion share buyback programme is now 75% complete".
"The telecoms sector is one based on reliability, but equally importantly on price, where there remains ferocious competition. Recent years have also required huge investment as the industry moves on, such as being part of the new 5G network, with the benefit of any payback not being felt for any number of years."
The shares rose 5.2% to 93.56p in the first hour of trading.
** UPDATE: Adds details on dividend, share price, analyst comment **