R100 invested in Vodacom and MTN – the winner is clear

If you invested R100 in Vodacom and MTN thirteen years ago and reinvested dividends, Vodacom would have returned R451, much higher than MTN’s R207.

Vodacom and MTN are Africa’s largest telecommunications companies and dominate the local mobile market.

South African investors who want to have exposure to the telecommunications sector are often faced with a choice between the two companies.

It raises the question of how Vodacom and MTN have performed since Vodacom was listed on the JSE thirteen years ago.

Vodacom’s share price has grown by 125% – from R56.75 to R127.52. Without taking dividends into account, it translates into an annualised price return of 6.98%.

Over the same period, MTN’s share price increased by 17.6% – from R114.70 to R134.80. It equates to an annualised price return of 1.4%.

However, share price growth only tells part of the story.

Vodacom and MTN are dividend-paying stocks, with dividend yields of 6.67% and 2.23%, respectively.

Vodacom had strong dividend growth from 2010 to 2013, after which the dividends stabilised.

The dividend has been maintained at a high level, consistently bringing income to investors.

MTN, in comparison, had very strong dividend growth from 2005 to 2015. However, the dividend has come under pressure since then, with negative growth and no dividend payments since 2020.

It makes a meaningful difference when considering the impact of the dividend income on the stock’s returns.

R100 invested in Vodacom and MTN in 2009

An easy way to assess the value Vodacom and MTN created for investors are by calculating the return on R100 invested in the two companies.

R100 invested in Vodacom in 2009, when the company was listed, would have yielded R451 if the dividends were reinvested.

MTN, in comparison, would have only returned R208, less than half of what Vodacom gave investors.

The graph below shows the return of R100 invested in Vodacom and MTN over the last thirteen years.