Understanding Nvidia's Dividend Payout

Nvidia's dividend payout might surprise you.

Nvidia (NVDA) is known as one of the leading stocks in the artificial intelligence (AI) sector. However, many investors may not realize that Nvidia also offers a dividend. Furthermore, there have been recent changes that may catch investors off guard.

Nvidia's Unexpected Dividend Changes in 2024

Typically, successful companies that enjoy rapid revenue growth will increase their dividend payouts. On the surface, it may seem that Nvidia is going against this trend.

Back in 2020, Nvidia was providing a quarterly dividend of $0.16 per share. However, in 2021, this was reduced to $0.04 per share. Most notably, in early 2024, the dividend saw another decrease, plummeting to just $0.01 per share each quarter. Consequently, Nvidia's current dividend yield stands at a mere 0.02%, with a payout ratio of only 1% of its earnings.

Yet, these figures do not take into account the company’s stock splits, which can alter the appearance of dividend growth. For example, this year Nvidia executed a 10-for-1 stock split. When you adjust for this split, the existing $0.01 quarterly dividend is equivalent to $0.10 per share before the split, which is more than double the previous rate. This scenario was also evident in 2020 when Nvidia performed a 4-for-1 stock split.

Nvidia's Financial Performance

It’s essential to understand that Nvidia is not suffering financially. Since 2020, the value of Nvidia's shares has skyrocketed by over 1,000%, driven primarily by an increasing demand for AI GPUs. This segment of the market showcases Nvidia's impressive market share ranging from 70% to 95%. With such high demand, the company's profits have surged.

Thus, even though the dividend payout appears to have decreased, taking the stock splits into account reveals a different perspective. The dividend rate has been increasing but is overshadowed by an even more significant rise in earnings, leading to a drastically lowered payout ratio.

In conclusion, Nvidia continues to be recognized as a growth stock rather than an income stock. Don't let the headline figures mislead you; Nvidia is still incrementally raising its dividend while navigating its growth trajectory, although this may be somewhat concealed by large stock splits.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Nvidia, Dividend, Growth