Since I last wrote about Nokia Oyj (ADR) (NYSE:NOK) on Mar. 20, its stock has made a nice little run moving 15% higher. With NOK stock on fire, can $10 be far off?
That I can’t tell you. What I do know is that while Nokia stock isn’t the worst in the world, you can definitely do better.
Whether you own 20 large-cap stocks or 100, you ought to consider why you want to own NOK stock. Chances are its dividend has something to do with it, although at less than 3% given the stock’s gains over the past three months, it’s not quite as attractive.
At current prices you can own Intel Corporation (NASDAQ:INTC), whose dividend yield is 3.1%, and it is expected to generate $13.5 billion in 2017 earnings (4.71 billion shares times 2017 EPS estimate of $2.86), more than Nokia’s $10 billion in cash, another of the Finnish company’s endearing qualities.
NOK Stock: It’s Not Enough
A recent guest contribution in Business Insider from Ilya Levtov of Priceonomics, a company that uses data to create interesting online content, looked at the highest and lowest revenue-per-employee (RPE) of S&P 500 companies.
Of the 20 tech companies, Intel had the third-lowest RPE at $560,000. By comparison, Apple Inc. (NASDAQ:AAPL) was number one at $1.9 million per employee or almost four times as much.
What’s Nokia’s RPE?
Well, thanks to the Alacatel acquisition in 2016, it had $26.4 billion in revenue and 102,687 employees for an RPE of $258,000.
So, despite a multi-billion dollar acquisition, NOK doesn’t come close to either company in terms of productivity. Of course, it gets worse if you factor in profit-per-employee (PPE), which I would argue is a lot more important than RPE.
Apple’s PPE is $394,000, which is $45.7 billion in net income for the trailing 12 months divided by 116,000 employees. Intel’s PPE is $106,000 which is $11.2 billion in net income for the trailing 12 months divided by 106,000 employees.
The data for the number of employees comes from Fortune’s 2017 list of the world’s 2,000 biggest companies. Apple was number one for profits; Intel was 54th.
Nokia?
According to NOK, it’s the 608th largest company in the world. Of course, that’s by revenues. By profits, it ranks ahead of only 68 of these global behemoths.
Nokia: Potential Don’t Mean Squat
InvestorPlace contributor Dana Blankenhorn recently discussed NOK’s settlement with Apple over patents that got it several hundred million in cash from Tim Cook and the gang in Cupertino.
More importantly, the future potential of Nokia stock is it’s ability to sell 5G gear to the wireless carriers: “It’s the gear where the big sales numbers will come from, and the gear where the profits will come from. That gear is still in the lab, and on the show floors of trade shows. It is likely to remain there for a few years, while carriers sell the sizzle of 5G to raise money with which to buy the steak,” Dana wrote. “When the orders come in, that’s when you want to be in Nokia stock. Until then, avoid it.”
I agree 100%.
Bottom Line Nokia Stock
Given you can get relatively comparable dividend yields from much better tech companies — Apple yields 1.7% and Intel’s is currently higher than Nokia — the opportunity cost of sticking with NOK stock seems pointless.
Investors can do better elsewhere … and they should.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
