Nvidia raised its quarterly dividend 2,400% in May, from $0.01 to $0.25 a share, but the payout still adds up to just $44 a year on a $10,000 investment. The company has paid about $6.2 billion in dividends so far this fiscal year, dwarfed by nearly $40 billion spent on share buybacks.
A 2,400% raise that still pays $44 a year
At around $225 a share, $10,000 buys roughly 44 shares of Nvidia.
The new annual dividend of $1.00 a share works out to an $11 quarterly check, or $3.70 a month. Before the raise, those same 44 shares paid just $0.04 a year, or less than $2 in total.
The company raised its quarterly dividend from $0.01 to $0.25 a share back in May, a 2,400% increase. The first $0.25 payment went out June 26 to holders of record as of June 4, and another $0.25 went ex-dividend Sept. 10, payable Oct. 1.
Buybacks still drive the capital-return program
Nvidia was still on the penny dividend during its fiscal first quarter, paying about $243 million. After the raise, the dividend payout jumped to $6.0 billion in the second quarter, bringing the year-to-date total to about $6.2 billion.
That figure is still a side dish next to buybacks. Nvidia spent about $19 billion in Q1 and about $20 billion in Q2 on share buybacks. Management has said it wants to return 50% or more of free cash flow to shareholders, net of strategic uses, and after adding an $80 billion repurchase authorization in May, roughly $99 billion was still available at the end of the second quarter.
Nvidia isn't a dividend stock yet
Nvidia's dividend yield is still only 0.44%, well below what investors see from utilities, REITs, or business development companies. The more prudent read is that Nvidia is a growth company sitting on more cash than it can comfortably spend on chips, software, and strategic investments, so both the dividend and the buyback program can keep rising if free cash flow keeps compounding. That doesn't turn Nvidia into a dividend stock overnight, even as more hikes would not be shocking.
Source: The Motley Fool
Trading involves risk.
Risk Disclaimer
