Recession-Proof Stocks: Nokia

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No stock is recession-proof. But if you had to buy one -- and you knew you were either about to enter a recession, or already in one -- wouldn't you prefer to own shares of a market leader that possessed a global growth opportunity and a meaty dividend?

Certainly you would. Academic research would applaud your choice -- if it had hands.

Trouble is, there aren't enough fast-growing market leaders that also pay dividends. My pick for this contest -- Nokia (NYSE: NOK  ) -- is among the few. Let's review.

A market leader
The proudest moment for a writer is when he or she paints a picture with words, providing a mental image so clear that only one conclusion is possible. Foolish colleague Rich Smith accomplished this recently:

May I please have 15 volunteers? You, sir. In the back. And ma'am, thank you, too. ... OK, that's enough. That's 15. Now, will the young lady in yellow please take one step forward. Everyone else, please look at her, and marvel. If our 15 volunteers here represent the population of the world, the young lady in yellow represents the proportion of that population that bought a Nokia brand cell phone last year.

Instant understanding. One in 15 people in the world are Nokia customers. Oh my.

Wait, it gets better:

Time Period

Market Share

Q1 2008

39.6%

Q4 2007

40%

Q3 2007

38.6%

Q2 2007

37%

Q1 2007

35.7%

Source: IDC Research.

See the pattern? Nokia's global footprint is getting bigger. And not just in Europe. According to a 2007 study of 2,000 consumers across Asia, 68% of current Nokia users plan to stick with the brand. Neither Samsung nor Ericcson (Nasdaq: ERIC  ) yielded 50%.

A global growth opportunity
Nokia's strength is its diversity. Some of its models are lightweight and cheap and meant for emerging economies such as India, where reports say Nokia has nearly 60% of the market.

But Nokia is also a leader in smartphones. Yes, you read that right. Neither Apple (Nasdaq: AAPL  ) nor Research In Motion (Nasdaq: RIMM  ) command the market for these gizmos, even though they were gaining as of the first quarter:

Vendor

Q1 2008

Market Share

Q1 2007

Market Share

Change

Nokia

45.2%

46.7%

(1.5)

Research In Motion

13.4%

8.3%

5.1

Apple

5.3%

0%

5.3

Sharp

4.1%

7%

(2.9)

Fujitsu

4.1%

5%

(0.9)

Others

29.9%

33%

(3.1)

Source: Gartner.

Look at those numbers closely. Even though Nokia lost some market share, its peers, as a group, lost four times as much. Apple and RIM, therefore, aren't stealing from Nokia so much as they are from lower-tier smartphone vendors.

And at a good time, too: Smartphone shipments were up 29% in Q1, says researcher Gartner.

So growth isn't a problem. But competition may be. Rich says the dissolution of the "Pax Nokia" -- in which Nokia and its peers shared ownership of smartphone operating system vendor Symbian -- could turn peers to the Android OS.

He may be right. But is that really so bad? Android is delayed. Plus, thanks to the iPhone, we know that smartphones can benefit from a central point of design control. Nokia will finally have that via its acquisition of Symbian, which Canalys calls the world's most widely used smartphone OS.

A meaty dividend
Finally, the numbers. Nokia has increased its per-share dividend payment by 13.6% a year over the past five years. Neither RIM nor Apple nor Palm (Nasdaq: PALM  ) pays a dividend.

Motorola (NYSE: MOT  ) does and its 2.7% yield is well above the 1.99% you'll get from S&P 500 Depository Receipts (AMEX: SPY  ) . But Nokia beats 'em all with a 3.2% yield. Sweet.

A market leader with a global growth opportunity and a meaty dividend. There's a name for a stock like that: Nokia, and it's the one you want to bet on coming out of a recession.

If you agree, log into CAPS now and pick Nokia to outperform. Our editors will tally your votes and, in the coming days, reveal the one stock you believe is best equipped to stiff-arm the rampaging market monster that's attacking your portfolio.

Fool contributor Tim Beyers, who is ranked 20,596 out of more than 110,000 participants in CAPS, also writes for Rule Breakers. Apple is a Motley Fool Stock Advisor selection. He owned shares of Nokia at the time of publication. Find Tim's portfolio and his latest blog commentary. The Motley Fool has a disclosure policy.


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