Key insights
- Nvidia's recent dividend increase still results in a low yield (0.48%), requiring an investment of approximately $2.1 million for $10,000 in annual dividends. This makes it unattractive for income investors, reinforcing its position as a growth stock focused on AI, rather than an income-generating asset.
Without a doubt, Nvidia (NVDA +3.08%) has been one of the best-performing stocks in the market, as its shares have climbed 1,050% in the past five years (as of June 17). Positioned at the center of the artificial intelligence (AI) boom, this business continues to register incredible demand for its powerful data center graphics processing units.
But many investors might not be aware that this AI stock pays dividends. Here's how many shares you'd need to own to generate $10,000 in passive annual income.
Back in May, Nvidia significantly bumped up its quarterly per-share dividend payout, going from $0.01 to $0.25. Consequently, investors now need 10,000 shares to generate $10,000 in annual income. At the current stock price of $206.45, this means it would cost almost $2.1 million to acquire enough shares.
This is not exactly an enticing proposition for income investors. At 0.48%, the stock's current dividend yield is small. Stocks in the S&P 500 index pay an average dividend yield of 1.04%.
It's easy to figure out that Nvidia is not a smart portfolio addition for investors who are after sizable dividends. If this sounds like you, it's best to find mature businesses with management teams that focus intensely on shareholder capital returns.
Nvidia is a company that caters primarily to growth investors seeking big returns by betting on the AI revolution.