NVIDIA’s Explosive Stock Price Growth and Solid Dividend Yield makes it a Hot Choice for Income & Growth Investors. But is it Really Great?
In recent years, the NVIDIA Corporation (NASDAQ: NVDA) has become one of the hottest stocks in tech. It is easy to see why the chipmaker’s revenues doubled in the past two years.
Back in July 2016, NVIDIA reported annual revenues of $5.439 billion. Those revenues increased to $10.98 billion in April 2018, just two years later.
That performance was not unnoticed by the market. NVIDIA shares were trading at $172.11 on 9 August 2017. Less than one year later, that share price rose to $258.93 on 9 August 2018.
However, NVIDIA’s share price fell to $148.25 on December 11, 2018. Not surprisingly, many people will wonder if the price makes NVIDIA a value investment.
Why Investors Like NVIDIA’s Dividend
Many dividend investors have taken notice of NVIDIA because the chip manufacturer pays a dividend. More importantly, NVIDIA has been paying a regular dividend each quarter since November 2012.
The NVIDIA dividend began with a 7.5¢ payout in December 2012. By September 2018, the NVIDIA dividend grew to 15¢.
Moreover, NVIDIA is planning to pay a 16¢ dividend on December 21, 2018. Thus, NVIDIA’s dividend more than doubled in value in just six years.
Even though the NVIDIA dividend is relatively new, it has been reliable and growing steadily. Importantly, NVIDIA shareholders have received a dividend each quarter since December 2012.
Does NVIDIA Pay a Dividend?
Yes, NVIDIA Pays a Dividend. Many dividend investors have taken notice of NVIDIA because the chip manufacturer pays a dividend. More importantly, NVIDIA has been paying a regular dividend each quarter since November 2012.
NVIDIA began with a 7.5¢ payout in December 2012. By May 2018, that payout had grown to 15¢ – nearly double the original amount.
Even though the NVIDIA dividend is relatively new, it has been reliable. Owners of NVDA have a payout each quarter since it launched the dividend.
Slow but Sensible Dividend Growth at NVIDIA
The most attractive feature of NVIDIA’s dividend is the very slow and sensible growth.
Since 2012, the dividend has been growing by around one cent a year. The NVDA dividend started at 7.5¢ in 2012; grew to 8.5¢in 2013, expanded to 9.75¢ in May 2015, increased to 11.5¢ in November 105, jumped to 14¢ in November 2016, and landed at 15¢ in November 2017. As noted above, the dividend will grow to 16¢ in December 2018.
Therefore, NVIDIA has been delivering steady dividend growth for nearly five years. That gives it the characteristics of a traditional industrial dividend stock rather than a tech issue.
By December 10, 2018, NVIDIA investors were receiving a .0.42% dividend yield, a 64¢ annualized payout, and a 9% payout ratio. Those figures are conservative, which points to prudent management that issues a realistic dividend.
NVIDIA is making a Lot of Money
The dividend is just high enough to reward investors, but it does not exceed NVIDIA’s resources to pay.
Importantly, recent financial numbers indicate NVIDIA has the resources to maintain that dividend for a long time to come. Specifically, NVIDIA’s revenues are growing, and it is making a lot of money.
For instance, NVIDIA reports a revenue growth rate of 20.68% for the 4th Quarter of 2018. Additionally, NVIDIA generated a gross profit of $1.921 billion on revenues of $3.181 billion during the 4th Quarter.
From those revenues, NVIDIA made an operating income of $1.058 billion and a net income of $1.230 billion. Hence NIVIDA is making enough money to pay a 16¢ dividend for the foreseeable future.
NVIDIA is generating a lot of Cash
Dividend and value investors like NVIDIA because the company’s business generates a lot of cash.
For instance, NVIDIA recorded an operating cash flow of $487 million, an investing cash flow of $219 million, and free cash of $337 million for the 4th Quarter 2018. Beyond cash flow, NVIDIA reported $721 million in cash and equivalents and $6.87 billion in short-term investments on October 28, 2018.
Thus NVIDIA had $7.591 billion in cash reserves at the end of 4th Quarter 2018. These numbers point to prudent management, which is not spending all the extra cash on big dividends.
Instead, the cash is being spent to grow the company’s business. Additionally, NVIDIA is storing up cash for acquisitions, research and development, and other activities that could drive future growth.
Under these circumstances, the current dividend at NVIDIA is sustainable without harming the company’s future growth prospects. That makes NVIDIA an excellent dividend stock for a long-term portfolio.
Is NVIDIA a Good Dividend Income Stock?
All this makes NVIDIA a superb income stock because the dividend’s value is growing every year. More importantly, the dividend yield and payout ratio exceed the rate of inflation.
The 2018 projected rate of inflation for the United States is 2.54%, compared to an 8.5% payout ratio for NVIDIA dividends. Therefore, the dividend exceeded the rate of inflation by around 6%. This makes NVIDIA a good stock for long-term portfolio growth because the dividend easily cancels out inflation.
To add icing to the cake, economists project the US rate of inflation to remain at under 2.44% through 2023, according to Statista. Statista forecast the rate of inflation to be 2.44% in 2019, 2.13% in 2020, 2.04% in 2021, 2.07% in 2022, and 2.12% in 2023.
If NVIDIA’s payout ratio holds up for the next few years, it should easily beat inflation. That alone would be a valuable addition to a dividend-based portfolio.
[Related Article: The Best Stock Screeners To Find Dividend Income & Value Stocks]
NVIDIA is both a Growth Tech Stock and a Dividend Value Investment
The fascinating attribute of NVIDIA is that it is a tech stock that is also a valuable investment.
NVIDIA is a tech stock because it manufactures graphics processing units or GPUs. The GPUs are the chips, or graphics cards, required to operate an incredible variety of innovative technologies.
That makes NVIDIA something a value investment because it supplies the raw materials other companies need to operate. Artificial intelligence (AI), video games, streaming video, the Blockchain, cryptocurrency mining, robots, and self-driving vehicles are just a few of the things run by GPUs.
NVIDIA is the gold standard in the world of GPUs. Its products are so popular that there was a well-publicized shortage in early 2018. Cryptocurrency miners reportedly bought up the entire GPU supply, Ars Technica noted.
“We’re sold out of many of our high-end SKUs, and so it’s a real challenge keeping [graphic cards] in the marketplace for games,” NVIDIA CEO Jensen Huang admitted in a 26 March 2018 interview.
“We’ve been pioneering this computing approach called GPU computing for over the last decade,” Huang told Tech Crunch. “Over the last seven or eight years, it really went into turbo charge because the model is perfect for artificial intelligence.”
NVIDIA is developing new Streams of Revenue
Importantly, NVIDIA is developing new uses for its GPUs that could lead to new streams of revenue.
For example, NVIDIA’s Jetson TX2 is an AI computing device designed for the operation of drones. NVIDIA claims the Jetson TX2 is so powerful it will enable artificial intelligence to operate in drones. Hence, AI drones could be able to operate without the remote control.
In particular, a French company called Notio Plus is using the JetsonTX2 to operate the iBubble. The iBubble is described as the “world’s first autonomous underwater drone.”
There are many potential commercial and military applications for the iBubble. Specifically, navies could use the bubble as a scout craft, a rescue vehicle, or to clear mines. Furthermore, there are commercial uses for ibubble, including salvage and oil and gas exploration.
The iBubble is just one example of the many different drones or robots that the Jetson TX2 could operate. The Jetson TX2 could be used in delivery drones, military drones, earthmovers, crop dusters, air taxis, and space probes.
NVIDIA poised to Cash in on Self-Driving Cars
Interestingly, the Jetson TX2 is just one of several artificial intelligence processors that NVIDIA is developing. Presently, the NVIDIA AI processor with the greatest commercial potential is the NVIDIA Drive.
The Drive is a scalable AI platform that will serve as an operating system and processor for self-driving vehicles. The market for Drive could be huge because all the major and ride-hailing firms like Uber are planning autonomous vehicles, The Verge claims.
For instance, Mercedes Benz’s parent Daimler AG and auto parts supplier Bosch selected the NVIDIA Drive variant called the Pegasus processor for their robot-taxi experiment. Automakers reportedly deploying NVIDIA Drive include Toyota, Daimler, Audi, Volkswagen, and Tesla Motors.
Is NVIDIA a Good Growth Stock?
Here you can see our 5-year stock chart of the stock price growth for NVIDIA Corp. Historically NVIDIA is one of the darlings of the Stock Market with exponential price growth.
NVIDIA is a Value Investment from Silicon Valley
Thanks to solutions like Drive, NVIDIA looks more like a company that Warren Buffett would invest in than a traditional tech stock. The company concentrates on manufacturing one class of product (GPUs and other processors).
It supplies the infrastructure, algorithms run on, rather than creating the software. That means NVIDIA makes its money the old-fashioned way by selling a physical product vital to the industry.
On the other hand, NVIDIA does not take the risks of selling new technologies directly to the public. Instead of building drones or autonomous cars, NVIDIA provides the processors those machines require.
Hence, NVIDIA could make money no matter which company builds the self-driving car or the drone. That company will have to turn to NVIDIA or one of its competitors for processors to operate the drones or autonomous vehicles.
NVIDIA is not Your Typical Silicon Valley Company
Another attribute is that NVIDIA is far more stable than your typical Silicon Valley Company. It is still run by the founder, Huang, who has been CEO since 1993.
To attain growth, Huang is still following the same conservative strategy he’s always followed, build a better product. NVIDIA’s revenues and the GPU shortages demonstrate that strategy works.
That stability will attract more conservative investors who distrust most tech companies. The stability is good for dividend investors because it leads to stable profits and steady payouts.
Best of all, NVIDIA is not resting on its laurels. The company is constantly seeking new markets for its products.
Therefore, NVIDIA is a safe and stable dividend stock with the potential for a lot of growth. Those seeking a dividend poised to grow over the next decade should investigate the NVIDIA Corporation (NASDAQ: NVDA).
NVIDIA poised to Cash in on AI
Best of all, NVIDIA is not resting on its laurels. The company is constantly seeking new markets for its products.
This makes NVIDIA a responsible company because it is developing new markets with the profits from the older ones. That will help preserve the dividend.
Therefore, NVIDIA is a safe and stable dividend stock with the potential for a lot of growth. Those seeking a dividend poised to grow over the next decade should investigate the NVIDIA Corporation (NASDAQ: NVDA).
Nvidia Artificial Intelligence Video
Is Now a Good Time to Buy NVIDIA Stock?
In terms of Market Timing for a Stock purchase, you can look at Technical Analysis Provided by TradingView. This is a summary of the Stock Chart Indicators Relative Strength, Stochastic, CCI, ADI, Momentum, MACD, and a suite of Simple and Exponential Moving Averages.
Further Reading on Dividends
If you are looking for alternative dividend stocks, check out our Best Real Estate Investment Trusts Paying Monthly Dividends, or our Top Monthly Dividend Stocks.
All Dividend Articles on Liberated Stock Trader
If you are interested in NVIDIA, you might want to review our INTEL Dividend Report.
Suppose you want the very best dividend income stocks to look at our Dividend Emperors report. Our Highest Paying Dividends Special Report is also important reading.
Important Tech Stocks worth considering are generally Dividend, and Growth Stocks are Intel, Microsoft & Apple.
Note: Liberated Stock Trader is in no way affiliated or paid by this company. This is an unbiased research report. However, we may currently hold this stock.
