Citi reiterates 'buy' for Vodafone, says dividend cut not its base case

Analysts at Citi reiterated their 'buy' recommendation for shares of Vodafone on Tuesday, telling clients that a cut to the telecoms outfit's dividend payout was not their base case.

Ahead of the company's full-year numbers due out on 14 May, the broker said it could not rule out a cut.

Indeed, the market was already reflecting that possibility through the greater than 9% dividend yield that the shares were sporting, amid the ongoing German spectrum auction, but "that is not our base case".

However, even when adjusting for financing adjustments and for normalised spectrum outflows - of say €1bn per year - Vodafone's near €4.0bn payout was almost covered, they said.

Adjusting for financing adjustments, Citi pegged Vodafone's free cash flow at roughly €4.8bn.

Within the same research note, the broker also noted that it was its last set of full-year figures which had acted as the catalyst for the "consistent derating" in the share prince seen since then.

Citi also kept intact its 180.0p target price for the shares.