Nvidia (NVDA 2.13%) remains one of the hottest artificial intelligence (AI) stocks on the market. But did you know that the company also pays a dividend? And something strange happened to that dividend earlier this year.
NASDAQ: NVDA
Key Data Points
Nvidia made a surprising dividend change in 2024
Many profitable companies that experience rapid growth in their sales opt to boost their dividend payments over time. At first glance, the opposite seems true for Nvidia.
In 2020, the company was paying a quarterly dividend of $0.16 per share. In 2021, the quarterly payout was lowered to $0.04 per share. And then, in early 2024, it was lowered again to just $0.01 per share per quarter. All of this has brought Nvidia's dividend yield down to just 0.02%, with a payout ratio of merely 1% of Nvidia's bottom-line earnings.
But these numbers don't reflect the company's stock splits, which can artificially disguise a rising dividend. Earlier this year, for example, the company enacted a 10-for-1 stock split. Adjusted for this stock split, the current $0.01-per-share quarterly dividend is really equivalent to $0.10 per share on a pre-split basis -- more than double the previous dividend payout. The same was also true in 2020, when the company split its shares 4 for 1.
NVDA Dividend Yield data by YCharts
Of course, Nvidia isn't struggling financially. Since 2020, shares have risen in value by more than 1,000%, buoyed by a massive surge in demand for AI GPUs -- a segment of the market in which Nvidia maintains a market share of 70% to 95%. Profits have skyrocketed due to this demand. So while the dividend rate actually has been rising when adjusting for stock splits, it has been completely overshadowed by an even bigger increase in earnings, causing the payout ratio to fall dramatically.
In summary, Nvidia very much remains a growth stock, not an income stock. But don't let the top-line numbers fool you -- Nvidia continues to up its dividend rate, a reality somewhat masked by massive stock splits.
