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ATTORNEY

Down 27% in a year, this FTSE 100 stock is ringing alarm bells for me

Young Black woman looking concerned while in front of her laptop

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One of the ways I try to identify undervalued stocks is by screening for companies that have significantly fallen in value over the past year. This can flag up firms that the market has pushed below the long-term fair value. However, not all of these represent a good buying opportunity. In fact, I’ve found one FTSE 100 stock from which I’m going to be staying well away.

Concern over recent results

That company is Vodafone Group (LSE:VOD). The multinational telecommunications company has operations in 21 countries directly and partner networks in another 47 countries, highlighting its broad reach around the world.

For several years now, the share price trend has been lower. Over the past five years, the stock is down 58%, with a fall of just under 27% in the past year. Judging its H1 results released last November, there are several reasons I can identify for the fall over the past 12 months.

For a start, net debt is significant. In the six months covered, it increased by €3.9bn to €45.5bn. Contributing factors to this include dividend payments and share buybacks. Even though the debt-to-equity ratio isn’t ridicously high at 1.73x, it certainly isn’t around the figure of 1 that would be more comfortable.

Shareholders would naturally be a bit spooked by the rising debt levels. Yet potential dividend investors also need to be watchful going forward. The current dividend yield of 8.11% is very attractive. Yet in order to reduce the debt pile, a logical step would be to reduce the dividend payments. By retaining more of the future profits to pay off debt, it leaves less to pay out to investors.

More red flags

The business noted in the report that it’s aiming to cut €1bn of costs by 2026.

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INSURANCE

Health insurance premiums through marketplace poised to jump in 2023

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If you get your health insurance through the government Health Insurance Marketplace, you may want to brace for higher premiums next year.

Unless Congress takes action, enhanced premium subsidies — technically, tax credits — that have been in place for 2021 and 2022 will disappear after this year. The change would affect 13 million of the 14.5 million people who get their health insurance through the federal exchange or their state’s marketplace.

“The default is that the expanded subsidies will expire at the end of this year,” said Cynthia Cox, a vice president at the Kaiser Family Foundation and director of its Affordable Care Act program. “On average, premiums would go up more than 50%, but for some it will be more.”

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Most enrollees — which includes the self-employed and workers with no job-based health insurance — receive subsidies, which reduce what they pay in premiums. Some people also may qualify for help with cost-sharing such as deductibles and copays on certain plans, depending on their income.

Before the temporary changes to the calculation for subsidy eligibility, the aid was generally only available to households with income from 100% to 400% of the poverty level.

The American Rescue Plan Act, which was signed into law in March 2021, removed — for two years — that income cap, and the amount that anyone pays for premiums during the reprieve is limited to 8.5% of their income as calculated by the exchange.

Assuming Congress does not extend the expanded tax credits, only people with household income from

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