Nvidia (NASDAQ: NVDA) is widely recognized as one of the leading stocks in the artificial intelligence (AI) sector. Interestingly, the company also offers a dividend. However, some unusual changes to that dividend occurred earlier this year.
Nvidia’s Uncommon Dividend Strategy in 2024
Companies experiencing rapid growth usually increase their dividend payments, but Nvidia’s recent actions tell a different story.
In 2020, Nvidia provided a quarterly dividend of $0.16 per share. But in 2021, that amount was slashed to $0.04 per share. By early 2024, it was further reduced to just $0.01 per share per quarter. These changes have brought Nvidia’s dividend yield down to a minimal 0.02%, with a payout ratio of only 1% of the company’s earnings.
It’s important to note that these figures don’t consider Nvidia’s stock splits, which can distort perceptions of dividend growth. Earlier this year, Nvidia executed a 10-for-1 stock split. When adjusted for this split, the current quarterly dividend of $0.01 per share translates to $0.10 per share on a pre-split basis, which is more than double the prior payout. A similar adjustment applies to the 4-for-1 stock split carried out in 2020.
NVDA Dividend Yield data by YCharts
Nvidia has not encountered financial troubles; in fact, its stock price has surged over 1,000% since 2020, largely due to a booming demand for AI GPUs – a market where Nvidia holds between 70% and 95% of the share. This soaring demand has substantially boosted profits. Thus, even though the dividend rates appear to have decreased, they actually have risen when accounting for stock splits, although these gains have been outpaced by an even larger increase in earnings, leading to a dramatically lower payout ratio.
In conclusion, Nvidia remains firmly a growth stock rather than an income stock. Despite what the surface figures suggest, Nvidia is steadily increasing its dividend rate, a fact that is somewhat obscured by significant stock splits.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
