The telecoms giant is popular with both income and growth managers in the UK and global sectors, but investment research analyst Sheridan Admans does not anticipate much movement in its share price.
"Vodafone outperformed the UK telecoms sector by roughly 25 per cent in the first half of the year as investors sought income in this low interest-rate environment," he said.
"The company is now considered to have defensive qualities and the forecast dividend yield for 2013 is over 6 per cent."
"Although demand for mobile data continued to grow, it was at a much slower pace, providing little support for offsetting declines in voice and messaging services."
"Cash flow generation was also disappointing, with Vodafone now expecting it to come in at the lower end of its guidance."
"With this in mind, it is a struggle to see any short- to medium-term catalyst to drive that share price significantly higher and this is the reason for our change in recommendation."
Admans also points to disappointing operating figures in Europe, which have put a strain on other parts of the business.
"Interim results last week reported a £5.9bn write-down on its Spanish and Italian operations, where revenues fell 22 and 16 per cent respectively, putting pressure on its US and emerging market operations to offset these declines," he explained.
Despite these setbacks, Admans thinks Vodafone is an ideal stock for any income-focused portfolio – particularly if there is another special dividend in the near future.
He commented: "We continue to recommend Vodafone as a 'buy', as the stock offers income potential for investors."
"The interim dividend increased by 7.2 per cent to 3.27p per share, resulting in Vodafone continuing to be one of the top dividend-paying companies in the FTSE 100."
"It also holds a 45 per cent stake in American telecoms company Verizon, which distributed a special dividend in early 2012 and could make a similar payment in the near future."
According to FE data, Vodafone is up 40.48 per cent over three years – around twice as much as the FTSE 100.
However, it has had a tough time of late, down 10.34 per cent in the last month, compared with a loss of 1.96 per cent from the index.
Performance of stock vs index over 3-yrs
Source: FE Analytics
Vodafone is one of the most popular stocks with UK fund managers, appearing in the top-10 of 395 open-ended funds – 12 per cent of the total – and 33 investment trusts.
Around three quarters of funds in the IMA UK Equity Income sector hold Vodafone in their top-10, but it is also heavily represented in growth-focused portfolios.
In IMA UK All Companies, 146 of the 290 funds in the sector – just over half – hold the stock in their top-10.
These include Mark Lyttleton’s BlackRock UK Dynamic portfolio, which has a 6.8 per cent exposure, as well as Fidelity Moneybuilder Growth and M&G UK Growth, which have a 6.5 and 5.5 per cent exposure respectively. All three funds have more than £500m assets under management (AUM).
Twenty-one IMA Global funds also hold the stock in their top-10, including Aberdeen World Equity, Veritas Global Focus and the £1.3bn Fidelity Global Special Sits portfolio.