When considering any stock for your portfolio, don't be swayed by just the positives. Examine its pros and cons, and decide whether it's possible upside outweighs its risks. Let's take a look at Nokia (NOK 2.03%) today, and see why you might want to buy, sell, or hold it.

Based in Finland, Nokia is a major telecommunications company and smartphone maker, with a market capitalization recently near $9.7 billion. It was once a market darling, but has fallen on hard times, with its stock down about 53% over the past year and having fallen by an average of 12% annually over the past decade. Ouch.

One reason to consider Nokia is its business: smartphones are simply growing explosively, making many companies lots of money. Nokia is not a top dog at the moment, but smaller dogs can survive and thrive, too.

Another attraction is the company's dividend, recently yielding 6.6%. That's pretty hefty, but remember that some yields are steep only because the share price has fallen a lot. That's certainly the case here. Still, a big yield is a big yield – as long as the company can afford to keep paying it (and, ideally, raising it). Nokia has already seen its dividend payout fall in recent years, and it has been posting net losses instead of profits lately, as well. The dividend isn't doomed, but it's certainly challenged.

Meanwhile, though the company is clearly ailing, it still has a lot going for it. Its brand is well-known globally. According to the folks at Interbrand, it's the 19th most valuable brand globally, though its value has dropped by 16%. In just 2010, it was ranked eighth.

And while we may imagine that Nokia has been totally overwhelmed by competitors such as Apple (AAPL -1.22%) and Google (GOOGL -1.23%), it remains a significant player. As of the first quarter of 2012, Nokia boasted 22.5% of the global handset vendor shipments, second only to Samsung. (That's down from 30.4% a year earlier, though.) In global smartphone vendor shipments, Nokia's share was grimmer: a third-place 8.2%, down from 23.5% the year before. Samsung and Apple took the top two spots, with 30.6% and 24.1%, respectively (and both numbers reflecting strong year-over-year growth).

Nokia isn't just fading away. The company had a promising partnership with Microsoft (MSFT -1.27%) to launch a line of Lumia 900 smartphones, but it didn't turn out as well as they hoped. Complications and consumer frustrations led to Nokia offering $100 refunds, which didn't help its bottom line, either.

The company appears to be fairly nimble, though. Soon after Apple's new iOS was found to have disappointing mapping, Nokia, which bought mapping giant Navteq in 2007, announced a deal with Oracle (ORCL -0.97%) to provide mapping to enterprise customers. Nokia has also partnered with Groupon (GRPN -2.06%) to tie its mapping to the Groupon Now mobile service. It has deals with other companies, as well, and is actually a major provider of mapping services to automakers.

Meanwhile, the company has been selling off assets, which can be viewed as a smart cash-generating move or a sign of desperation. If it needs to, it has thousands of valuable patents it could sell, as well. Indeed, the patents are one reason why some have speculated that another company might want to acquire Nokia.

A final reason to consider Nokia is that it has fallen so far that it now sports a compelling valuation to some.

The price of Nokia's stock alone is one big red flag, as it's firmly in penny-stock territory, recently trading for about $2.60 per share. Stocks don't tend to fall to such levels without good reasons.

A glance at Nokia's financial statements will reveal some concerns: Yes, it's churning out considerable free cash flow – more than EUR400 million, over the past year. But that's down from EUR7 billion in 2007 and EUR4 billion in 2010. It carries a lot of debt, but it also has more than EUR10 billion in cash and equivalents.

The main reason to consider selling (or just not buying) Nokia is its competitive position. It may be a long-term winner in the mobile sphere, but right now it's struggling, and presents investors with a lot of risk. iDevices and Android devices are proliferating, and they're hard to fight. Nokia might be able to pull it off, with its strong brand and some ingenuity. For one thing, it's now targeting lower-end users, with a lower-cost smartphone. That could be a smart move, as that's a big population to address, especially in developing economies.

Hold (off)
Given the reasons to buy or sell Nokia, it's reasonable to decide to just hold off. You might want to wait for its market share and free cash flow to start moving in the other direction, or for it to pay down more debt.

The verdict
I'm going to pass on Nokia for now. Everyone's investment calculations are different, though, so do your own digging and see what you think. Remember that there are plenty of other compelling stocks out there.