Paying you for your patience
Jamie Louko (Nvidia): Since 2014, this leading chip maker has been paying a dividend. Today, it is nearly at its lowest yield over that time frame at just 0.11%. This represents a payout ratio of just 4%.
However, Nvidia sees better opportunities to create shareholder value than by paying out a dividend right now. Nvidia is currently trying to capitalize on a chip industry it believes is worth $1 trillion, so the company is funneling most of its $9.5 billion in trailing 12-month net income into this.
This chip maker is already a leader in its core industries. It has over 200 million gamers using its GeForce gaming graphics processing units (GPUs). However, while Nvidia’s bread and butter for a long time has been gaming GPUs, the company has also seen tremendous growth in the data center market. Revenue for this segment skyrocketed 83% year over year to $3.75 billion in its fiscal first quarter, becoming Nvidia’s most significant revenue source. It also dominates the professional visualization space, holding 90% market share in graphics for workstations.
While much of the company’s opportunity will come from its mature markets, Nvidia is looking to extend its dominance in emerging segments like enterprise artificial intelligence and omniverse software. So far, Nvidia is succeeding. The world’s largest enterprises -- like Amazon (AMZN 0.01%) and PepsiCo (PEP 0.78%) -- are already adopting Nvidia’s omniverse software.
It will take a long time for Nvidia to fully mature in these emerging segments, but considering its chips are seen as the gold standard in some industries, the company looks poised to capture this opportunity. Long-term investors that want to capitalize on that can invest today, and the company will pay you a small dividend to reward your patience. That’s an appealing deal -- one that you might not want to pass up.
