Rick Munarriz and I are at it again. Last week, he argued that you ought to buy Amazon.com (NASDAQ:AMZN) and sell Akamai (NASDAQ:AKAM). This time, he says to buy Research In Motion (NASDAQ:RIMM). I think Nokia (NYSE:NOK), a stock I've owned since 2005, is the better buy for two reasons:

  1. It pays a dividend.
  2. It pays a sustainable dividend.

Research In Motion pays neither.

A history of paybacks
Have a look at Nokia's dividend history:

Year

Payout (euro)

2009

0.40

2008

0.53

2007

0.43

2006

0.37

2005

0.33

Source: Nokia's investor webpage.

If this looks discouraging at first, consider that Nokia last reduced its payout in 2002, and that was by just one cent. More important is that the world's largest supplier of mobile handsets saw earnings fall 90% in the first quarter. Shortly over a week ago, management announced a round of layoffs.

Between increased competition from Google (NASDAQ:GOOG), RIM, Apple (NASDAQ:AAPL), and Palm (NASDAQ:PALM), business has rarely been worse for Nokia. I'm surprised the company hasn't copied some of the bigger banks and cut its dividend entirely.

The worst news in 53 years is good news for you
But it hasn't, and that's outstanding news for existing investors like me. Let's use my history of holding shares as an illustration for why.

My first purchases in August of 2005 were at prices modestly above what we're seeing today. Yet I've still earned a positive return, thanks to four years of active dividend reinvesting. The best part? Even though Nokia cut its dividend some 25% this year from last, I still yielded more shares from reinvesting.

Reinvesting creates a virtuous cycle, you see. Here, a lower stock price combined with greater earning power -- 2008's reinvesting had created 10.4 more shares from which to earn dividends -- more than compensated for the effects of Nokia's cutback.

An opportunity to zig while RIM zags
Let's also remember that this market leader produced close to 2 billion euro (about 2.5 billion converted to dollars) in free cash flow even as its net income went into freefall. That's how you pay dividends consistently and still fund growth.

And by "growth," I mean innovation. CEO Olli-Pekka Kallasvuo showed off Nokia's new N97 at The Wall Street Journal's D7: All Things Digital conference this week. Among its features is the ability to download and play movies from Amazon's Unbox service, record and submit movies to YouTube, and built-in support for Adobe's Flash technology for animating websites -- a feature that the iPhone doesn't have.

Expect Nokia to make more breakthroughs in the coming years. Plans are under way to build a new research facility near the campus of the University of California at Berkeley. All told, Nokia has six labs in eleven locations worldwide, each working on ways to improve its underlying technology.

The BlackBerry doesn't boast the same sort of capital and research backing as Nokia's N-series does. What's more, the BlackBerry OS is a completely closed system, just like Apple's Mac OS. Nokia's Symbian, by contrast, is 100% open source, which history says should help to further spur innovation.

Emerging in the emerging markets
Finally, Nokia has a hammerlock on emerging markets where smartphones have yet to appear. Surely they will at some point but experience and scale count for something, argues CAPS All-Star MagicDiligence:

Nokia's growth will primarily come from new cell phone purchasers in emerging economies like China and India. The company's exceptional scale allows it to produce a commodity product (low-end cell phones) at much cheaper prices than [its] competitors-a key advantage. Nokia's scale advantage here is so dominant that it allows the company to earn over 15% profit even on these entry-level units, while it's most profitable competitor, Samsung, earns slightly above 13%. As prices continue to drop, only the firms able to produce at low enough prices will remain viable, and Nokia is clearly in the driver's seat here.

Scale, a massive R&D machine, and a sustainable dividend capable of bulking up even the skimpiest portfolio -- that's Nokia. The CrackBerry is cool, sure, but in these most critical areas, Research In Motion can't compare.

Get your clicks with related Foolishness:

Akamai and Google are Rule Breakers recommendations. Amazon and Apple are Stock Advisor selections. Nokia is an Inside Value pick. Try any of these Foolish services free for 30 days.

Tim had stock and options positions in Apple and Google and stock positions in Akamai and Nokia at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy just left a message in your voice mail.