Nokia (NOK) Cutting Its Dividend? Not So Fast...7:46 AM ET, 09/27/2012 - Street Insider
Given that Nokia's smartphone sales have been on the outs, investors might have to brace for something not seen in a while from Nokia (NYSE: NOK): a dividend-less stock. Currently, Nokia is burning through about $300 million of cash per month as it puts the farm on its Microsoft (Nasdaq: MSFT) Windows Phone 8-equipped Lumia 820/920 lineup.
Data has shown that Nokia trimmed its dividend by half over the past four years and may now be obligated to pay out 750 million (about $964 million) this year if it wants to keep investors happy. Recent data has Nokia's cash pile at about 4.2 billion as of June, with that number expected to drop to 3 billion by the end of the year. Paying a dividend out would put Nokia with about 7.5 to 8 months of cash into 2013, ceteris paribus.
In addition to its cash pile, Nokia has about 5.2 billion of debt with a
1.25 billion payment coming up in February 2014. Payments will also be made in FY16, FY17, and FY19.
There are also some naysayers out there who think Nokia should have cut its dividend when debt ratings were cut to junk status. One Deutsche Bank analyst doesn't think WP8 will give Nokia the kick it expected and restructuring costs won't put Nokia into cash-positive status until after FY14.
But, there is "one more thing" to consider: Apple (Nasdaq: AAPL). Due to settlement of a patent dispute in 2011, Nokia is said to receive about $10 (or more) per iPhone sold in IP licensing fees. In the first half of 2012 alone, Nokia got about $600 million in fees from Apple. Given the popularity of the device, Apple's contribution to Nokia could be helping to sustain the dividend, hence no cut has been made despite several warnings being issued this year.
The best part is that it's not clear what Nokia is getting from Apple; the number isn't explicitly reported in quarterly filings. One thing is for sure, dividend investors are getting an annual dividend yield of 6.5 percent at current trading prices, one of the best yields for a company nearing a market cap of $10 billion.
So, although the future of Nokia and WP8 is all but certain, investors willing to wait should be getting paid for a while. Shares are indicated for a higher open Thursday. |
