I’d buy 300 Vodafone shares a week for £100 in monthly passive income

Vodafone (LSE: VOD) shares have a market-leading dividend yield of just under 8.4%. With so much shareholder distribution on offer, I’m looking to the telecom titan for my portfolio this year.

Let’s find out how you can earn more than £1,200 a year in passive income by investing in FTSE 100 company.

The highest dividend stocks

Offer in the cost of Vodafone Limited shares is now 92. Over 12 months the stock has fallen 23%, pushing the dividend above the Footsie average.

Today, 300 shares would be worth £276. Just imagine me continuing to buy this amount of stock every week for a year. In total, I will pay £14,352 for 15,600 shares.

I can buy all the shares through my Stocks and Shares ISA, as the total amount fits within the £20k annual limit. This is useful because all income received in the ISA wrapper will not be subject to dividend tax.

At the current dividend yield, my shareholding would generate an annual passive income stream of £1,202.70 – a touch above £100 a month.

I can then reinvest the dividends into other Vodafone shares. This will allow me to benefit from the compounding effect in the long run.

Reasons to be bullish

After years of underperforming the FTSE 100, its latest financial results offer hope.

For the first half of FY23 Vodafone reported a 2% increase in revenue to €22.9bn, supported by service revenue growth and increased equipment sales. Operating profit also rose 12% to €2.9bn.

Much progress has been driven by success in Africa. The company is the continent’s leading technology provider by connecting more than 170 million Africans to a range of mobile and lifestyle services.

In addition, the business plans to merge its UK operations with Three UK. The deal will make the combined outfit Britain’s second largest mobile network operator. With 27m subscribers, it is second only to Virgin Media O2’s 32m.

The proposed merger will equip the company with the scale needed to accelerate the full 5G rollout and expand broadband connectivity. If that happens, I think the bond could generate positive momentum for the share price.

Risk

However, there are also significant headwinds to growth. In contrast to Africa, Vodafone has been flat in Europe. This was largely due to a 1.1% decline in service revenue in our largest market, Germany.

Additionally, the company’s level of debt makes for uncomfortable reading. With long-term debt of €67.5bn, the debt-to-equity ratio is around 116%. This has forced Vodafone to pursue aggressive cost-cutting measures to save $1.1bn by 2026, including its biggest round of layoffs in five years.

What’s more, today’s company lacks clear direction and leadership. Under pressure from a 40% fall in share prices during his tenure, former CEO Nick Read resigned on December 31. CFO Margherita Della Valle was tasked with steadying the ship as interim CEO.

My passive income portfolio

Although not without risks, I think better days await Vodafone if they can reduce their debt and accelerate their business.

If I had the money, I would invest in stocks to target a regular passive income stream.

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content in this article is provided for informational purposes only. It is not intended to be, nor does it become, any form of tax advice. Readers are responsible for conducting their own due diligence and seeking professional advice before making any investment decisions.