Nokia is an international dividend achiever. From the end of 1999 up until September 2008 this dividend stock has delivered an annual average total return of 5.00 % to its shareholders. Nokia’s share price has not recovered yet form its all time highs in the early 2000. The stock has lost over 45% of its value so far in 2008. In addition the company recently gave a warning that its third quarter market share will be negatively affected by the global slowdown.
At the same time company has managed to deliver a 22.30% average annual increase in its EPS since 1998.
Annual dividend payments have increased by an average of 23.40% annually since 1999, which is almost the same as the growth in EPS. A 23% growth in dividends translates into the dividend payment doubling almost every three years.
If we invested $100,000 in NOK on December 31, 1998 we would have been able to purchase 6642 shares (Adjusted for 2:1 and 4:1 stock splits). In March 1999 your annual dividend income would have been $764. If you kept reinvesting the dividends though instead of spending them, your quarterly dividend income would have risen to $5947 by May 2008. For a period of 10 years, your quarterly dividend income would have increased by 578%. If you reinvested it though, your quarterly dividend income would have increased by 678%.
The dividend payout has largely remained under 50% over our study period with the exception of the short spike in 2001. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
NOK does appear attractively valued with its low price/earnings multiple of 10 and low DPR as well as attractive yield at 3.80%. The current yield is pretty attractive based off historical standards. The current P/E is also attractive relative to what it has been over the past decade. One thing that bothers me however is that the dividend does fluctuate a lot and there is a larger possibility like in 2002 that the payment could be lowered if troubled times were to come again. Other than that Nokia is a great brand that should continue to do well in the future.
Disclosure: I do not own shares of NOK