In 2012, Nvidia (NASDAQ: NVDA) declared its first dividend. At the time, the payout was worth around $0.001875 per share on a split-adjusted basis, equating to a dividend yield of around 2%.
Since then, the dividend payment per share has risen dramatically. But the total amount the company is paying in dividends today might surprise you.
Following a recent raise, Nvidia's dividend payout has climbed to $0.01 per share each quarter -- five times its original payment. But due to a rapid rise in its share price -- over the past decade, shares have increased in value by more than 27,000% -- the dividend yield has actually fallen to just 0.03%. Nvidia's management team simply believes that the best use of its cash today is to grow the business, not to distribute it to shareholders.
Assuming the new higher rate is sustained, the next 12 months should see the company pay out $0.04 per share. That works out to roughly $1 billion in dividends -- a quarterly rate of around $246 million.
But given its much-higher profits, where is Nvidia investing its resources, if not in dividends? Over the past 12 months, around $1.9 billion has gone to capital expenditures. But research and development has seen the lion's share of spending, with more than $10 billion deployed over the last year.
The rise of artificial intelligence has just begun, and Nvidia's graphics processing units (GPUs) are a critical component of the industry's growth. Not only will Nvidia need to invest in new manufacturing facilities to meet burgeoning demand, but its research and development budget will likely need to expand even further to fend off rising competition. Suffice it to say: Don't expect Nvidia to become a dividend juggernaut anytime soon. Nearly all of its excess cash will be used to defend its leadership in the nascent but rapidly growing AI industry.
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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.
How Much Will Nvidia Pay Out in Dividends This Year? was originally published by The Motley Fool