Is This 5G Player's Dividend Safe?

Nokia's latest initiatives have promise, but its dividend safety remains unstable.

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Editor's Note: Today, Marc investigates a struggling telecommunications company whose latest initiatives look promising. While its dividend safety may be in question, it's slowly breaking into a new industry that has the potential to skyrocket... 5G is about to take the entire technology sector by storm. And Chief Trends Strategist Matthew Carr at our sister e-letter Profit Trends knows just the way to play it... Matthew has identified a single $5 tech stock that has the potential to return up to 24 times its initial investment. "The Next Tech Giant" is a pick-and-shovel play that manufactures the linchpin device that will make this revolution possible. Click here to learn more. - Mable Buchanan, Assistant Managing Editor In December, I determined that Nokia's (NYSE: NOK) dividend safety rating was an "F." A major issue was the variability of the company's free cash flow. Since 2012, free cash flow has been positive only in four years - and that includes estimates for this year. But I wanted to take another look at Nokia because the Finnish telecommunications company is a big player in the rollout of 5G.

Question of the Week   Are there any sectors you would never invest in? Click here to answer.   If you're unfamiliar with 5G, it is the fifth generation of mobile internet connectivity. It is expected to provide much faster speeds and more stable connections. Some have speculated it will lead to another technology boom, as users will be able to do more things from their mobile devices. Nokia is a major provider of equipment used to run 5G networks. It has a $3.5 billion deal with T-Mobile (Nasdaq: TMUS) to provide hardware and software for 5G technology. That is certainly positive news... But there are quite a few things to be concerned about when it comes to dividend safety.

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Free cash flow declined from 1.9 billion euros in 2016 to 1.2 billion euros in 2017. Last year, free cash flow was negative. This year, it's expected to be a paltry 7 million euros. Furthermore, Nokia's dividend history is even more fickle than its free cash flow. You can see the dividend was stable for a few years at 0.40 euros per share, but it declined in 2012 and was omitted entirely in 2013. After the payout was reinitiated in 2014, it fell again in 2015 and 2017. Knowing nothing about the company's business, all you'd have to do is look at the chart above to understand that Nokia's dividend is not stable. While 5G should help the company's business, until free cash flow rebounds enough to afford the more than 1 billion euros Nokia currently pays in dividends, investors should expect more dividend cuts in the future. Dividend Safety Rating: F If you have a stock whose dividend safety you'd like me to analyze, leave the ticker symbol in the comments section. You can also search Wealthy Retirement to see if I've written about your stock recently. Just click on the magnifying glass at the top right of the page and type in the company name. Good investing, Marc P.S. In a sector transformation like the one we're about to see in technology and telecommunications, it's important to avoid struggling companies like Nokia and identify the players that stand to profit. I've written before about the value of pick-and-shovel plays in riding the market upward. 5G has the potential to create that kind of change - it can create 3 million new jobs and $500 million in economic growth. And none of it will happen without the Next Tech Giant. Click here to watch the free presentation.

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