Analyzing Ericsson (NASDAQ:ERIC) and Nokia (NYSE:NOK)

Ericsson (NASDAQ:ERIC) and Nokia (NYSE:NOK) are both large-cap technology companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, institutional ownership, valuation, risk, analyst recommendations, earnings and profitability.

Valuation & Earnings

This table compares Ericsson and Nokia”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ericsson	$230.78 billion	0.16	$2.91 billion	$0.61	17.43
Nokia	$20.85 billion	2.32	$736.54 million	$0.16	52.72

Ericsson has higher revenue and earnings than Nokia. Ericsson is trading at a lower price-to-earnings ratio than Nokia, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Ericsson and Nokia’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ericsson	8.31%	20.89%	7.73%
Nokia	3.80%	10.48%	5.94%

Volatility & Risk

Ericsson has a beta of 0.97, indicating that its share price is 3% less volatile than the S&P 500. Comparatively, Nokia has a beta of 1.24, indicating that its share price is 24% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings for Ericsson and Nokia, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ericsson	4	5	1	0	1.70
Nokia	2	5	16	0	2.61

Ericsson presently has a consensus price target of $9.60, indicating a potential downside of 9.69%. Nokia has a consensus price target of $13.41, indicating a potential upside of 58.95%. Given Nokia’s stronger consensus rating and higher probable upside, analysts plainly believe Nokia is more favorable than Ericsson.

Insider & Institutional Ownership

8.0% of Ericsson shares are held by institutional investors. Comparatively, 5.3% of Nokia shares are held by institutional investors. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Ericsson pays an annual dividend of $0.19 per share and has a dividend yield of 1.8%. Nokia pays an annual dividend of $0.08 per share and has a dividend yield of 0.9%. Ericsson pays out 31.1% of its earnings in the form of a dividend. Nokia pays out 50.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Ericsson is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Ericsson beats Nokia on 9 of the 15 factors compared between the two stocks.

About Ericsson

Ericsson is a Swedish telecommunications technology company founded in 1876 by Lars Magnus Ericsson. Headquartered in Stockholm, it develops and supplies equipment, software and services for communications networks. The company’s offerings include mobile network infrastructure, including 5G radio and core network technologies, as well as cloud software and services for communications service providers. Ericsson also provides enterprise wireless solutions and communications platforms. Ericsson serves customers in markets around the world, including telecom operators, businesses and other organizations.

About Nokia

Nokia is a Finland-based technology company focused on communications networks and related services. Its offerings include mobile and fixed network infrastructure, IP and optical networking, cloud and network software, and private wireless solutions for businesses and public-sector organizations. The company serves communications service providers, enterprises, governments and other customers around the world. It also develops and licenses technology and intellectual property, including through its patent-licensing business.