Image Source: Pexels

TM Editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

Ericsson (ERIC) provides telecom equipment and services that are primarily used to build and facilitate mobile networks through operations in three segments: networks, cloud and software services, and enterprises.

The firm's customers have historically been primarily wireless carriers, but the firm is making a push to cater more to other enterprises as well, both as they try to take advantage of 5G capabilities and on other “as-a-service” communications platforms. The company also licenses its patents to handset manufacturers so their devices are compatible with wireless networks.

It offers its services through wholesalers and distributors. The company was formerly known as Allmanna Telefon AB LM Ericsson and changed its name to Telefonaktiebolaget LM Ericsson (publ) in January 1926.

Telefonaktiebolaget LM Ericsson (publ) was founded in 1876 and is headquartered in Stockholm, Sweden.

Three key data points gauge Telefonaktiebolaget L M Ericsson or any dividend-paying firm.

The key three are:

(1) Price

(2) Dividends

(3) Returns

Those three basic keys also best tell whether any company has made, is making, and will make money.

ERIC Price

Over the past year, Ericsson's share price grew just about 21.6% from $5.15 to $6.26 as of Monday’s market close.

If Ericsson shares trade in the range of $4.00 to 8.00 this next year, its recent $6.26 share price might fall to $5.56 by next year. Of course, Ericsson’s price could jump about the same $0.70 estimated amount or more.

My annual upside estimate of negative $0.70 however, is in line with the median of 5 analysts' target price estimates who track ERIC shares for brokers.

ERIC Dividend

Ericsson paid variable .annual dividends 19 years until 2020 when it began paying dividends semi-annually.

Ericsson’s most recent SA dividend of $0.13 was declared on February 2nd for shareholders of record on April 4th and the dividend was paid on April 17th.

A forward-looking $0.25 annual dividend yields 4% at Monday’s $6.26 share price.

ERIC Returns

To put it all together, add the Ericsson projected annual dividend of $0.25 to the estimated price upside of ($0.70) to get a ($0.45) estimated gross loss for the coming year.

At Monday’s $6.26 share price, a little over $1000 would buy 160 shares.

A $10 broker fee (if charged), paid half at purchase and half at sale, would cost us about $0.0625 per share.

Adding that unlikely ($0.0625) brokerage cost to the ($0.45) estimated gross loss reveals a net loss of ($0.5125) X 160 shares = ($82) loss for about an 8.2% estimated net loss on the year.

You might choose to pounce on Telefonaktiebolaget L M Ericsson. It is a 148-year-old dividend-paying Stockholm, Sweden-based digital telecom equipment firm that has a 24-year track record paying annual and semi-annual dividends. However, the potential for negative returns at the time suggests wanting to buy until ERIC’s price falls below $5.50.

The exact track of Ericsson’s future price and dividend will entirely be determined by market action.

Remember the true value of any stock is best realized through personal ownership of shares.

More By This Author:

Current Analysis: Canon
Current Analysis: Sun Life (SLF)
Current Analysis: BB Seguridad Participacoes