Nvidia Corp. (NASDAQ: NVDA) is rewarding its shareholders once again with a quarterly dividend of $0.01, payable on Friday, Dec. 27. That is the same as in the prior payout. The share price of this artificial intelligence (AI) darling has skyrocketed, but the payout is not only minimal but less than it used to be. It’s up to investors to decide what this says about management’s commitment to continuing to deliver consistent value to investors.

Why Investors Like Dividends

Investors favor dividend stocks for two main reasons. The first is that they offer enticing total return potential. Total return is a comprehensive measure of investment performance that includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. It is one of the most effective ways to boost the prospects of overall investing success.

Dividend stocks can also provide investors with a steady, reliable stream of passive income. Passive income is money that is earned with little to no ongoing effort, usually from assets that generate cash flow. This income can come from a variety of sources, including stock dividends. Generating passive income is a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.

Nvidia’s Dividend

Nvidia has paid a quarterly dividend since 2013. This latest penny-per-share payout is in line with the prior two dividends. Before that, the dividend was $0.04 per share going back to 2021, and before that shareholders received $0.16 a share. The current dividend yield is about 0.03%, which is well less than the average yield of its industry and sector. However, it is in the same ballpark as Western Digital Corp. (NASDAQ: WDC).

Of course, Nvidia’s share price has grown by more than 36,400% since 2013 as well, offering investors plenty of growth rather than income.

The Company

This company is a pioneer of GPU-accelerated computing and a world leader in AI computing. It is a full-stack computing infrastructure company with data-center-scale offerings that are reshaping the industry.

Nvidia is also a software and fabless company that designs and supplies graphics processing units (GPUs), application programming interfaces for data science and high-performance computing, as well as system on a chip units (SoCs) in the United States, Taiwan, China, Hong Kong, and elsewhere. It has had a significant impact on industries from gaming and robotics to automotive and healthcare to, of course, artificial intelligence.

Its headquarters are in Santa Clara, California, which is in Silicon Valley. The company was founded in 1993 by Jensen Huang, who is the current chief executive officer. Nvidia went public in January of 1999. Now it competes with or is similar to, among others:

• Advanced Micro Devices Inc. (NASDAQ: AMD)
• Broadcom Inc. (NASDAQ: AVGO)
• Cisco Systems Inc. (NASDAQ: CSCO)
• Hewlett Packard Enterprise Co. (NYSE: HPE)
• Intel Corp. (NASDAQ: INTC)
• Qualcomm Inc. (NASDAQ: QCOM)

The company was one of the Fortune 100 best companies to work for in 2024, and CEO Huang was named one of the 100 most influential people of the year. Nvidia stock replaced Intel in the Dow Jones industrial average. Among its biggest releases of the year was the Blackwell GPU architecture. It renewed and extended partnerships with major tech vendors such as AWS, Microsoft Azure, Google Cloud, and Oracle Cloud Infrastructure.

The Stock

This Magnificent 7 stock has grown over 2,200% in the past five years, far outperforming the S&P 500. In the past six months, though, its 1% or so gain is less than that of the Nasdaq. Shares hit an all-time high of $152.89 last month, but the mean price target is up at $172.80. That means that Wall Street sees about 24% upside in the coming year. The consensus recommendation is to buy shares, including 12 Strong Buy recommendations. Truist and Wedbush reiterated Buy-equivalent ratings recently.

The stock remains popular with hedge funds. Institutional investors hold about 66% of the shares. BlackRock and Vanguard have notable stakes. On the other hand, about 264 million shares, or about 1% of the float, are held short. And note that a couple of officers and a couple of directors parted with shares recently.

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