This week's stock price drop is attributed by many to Nokia's elimination of the dividend. For some reason, experienced investors need to be reminded, and amateur investors need to learn, that a dividend is not free money. It is like moving money from your left pocket to your right pocket and getting taxed for the journey. On the ex-dividend date, the stock price is adjusted down by the same amount as the dividend.
Dividends are great for mature companies with steady cash flow and no better place to put the profits. They are not for young companies or turnaround stories like Nokia. Nokia has done a great job cutting costs, making NSN profitable, setting up strong distribution channels with the carriers (esp. China!) and delivering the best smartphone with the best OS in the market. Nokia's turnaround is well underway but needs one or two more good quarters to prove itself to the analyst world.
Inexperienced investors often panic and sell when they wake up to a massive overnight move the in the price. This effect is magnified when a company like Nokia does only one large annual dividend, as opposed to smaller quarterly dividends. Nokia's last ex-dividend date occurred when the stock had already rapidly traveled down from a stable position in the low 5's to some stability in the high 3's. Shortly after the last dividend and corresponding automatic price drop, the slide accelerated until the stock was ridiculously oversold to $1.63/sh.
There are a lot of neophytes in Nokia right now, so thank goodness we don't have to experience a panic scenario on the ex-div date again. Nokia should have eliminated the dividend two years ago.
If the investing world is even a little logical (a big IF!), the price should recover back to the mid to high 4's next week after buyers recognize that the results were completely in line with the pre-announcement and the elimination of the dividend was not only likely but mandatory.
You are saying NOK is not a mature company? This sounds like a bit of a rationalization.
When the div gets thrown out the stock goes south. Even inexperienced investors know this.
What you haven't realized is this frees the short cash up to short even more.
The same pumpers who think the stock will double (increased market cap by 16B) Somehow can't handle a 1B payout. Can't have it both ways.
No headquarters, "sold out" phones and sold out investors.
I still think NOK will turn around, but thiis is now a sub $5 stock with 1 less reason to own it.
I just posted a postive comment on your rationale....and Yahoo deleted it.
Why does Yahoo delete comments...what vested interest do they have in stocks.....they are not brokers...and should be impartial on this and other Boards.
Sentiment: Strong Buy
As a former owner of four differnt businesses, I undertand why the dividend was eliminated. The extra $1 billion dollars needed to pay the dividend can now be put back into producing more inventory and cut down the debt that will inturn produce more profit and sales in the future. But I think Elop made a BIG MISTAKE by announcing that the dividend will be eliminated at the same time delivering the news that Nokia has produced a profit for the first time in 6 quarters because the dividend wasn't even payable until May 2013. The media jumped all over the announcement about the dividend and turned it into a negative item as expected. Now he has driven away a lot of investors that don't think Nokia is indeed a turn around storry. I will still hold onto my shares and see if any upgrades can turn this boat around again. I still think it has a good future but now the uphill climb will take longer. I think Elop just shot himself and us investors in the foot..
Good luck to all and don't listen to all the negatives from the analyists. Make your own decisions.
With that said people have short term memories and by end of next week this will most likely be forgotten.
Now, Nokia could use some of that money and start advertising the you-know-what out of the Lumia's here in North America, or better kick backs for the sales rep's.