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Why Nvidia’s strong cash flow boosts investor confidence

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Aug. 18 2020, Updated 10:24 a.m. ET

Dividend and share buyback program

2014 was the year that saw the biggest buyback announcements from leading technology players like Apple (AAPL) and Intel (INTC). Through dividends and share buybacks, Nvidia (NVDA) is also returning value to its shareholders.

In fiscal 2015, Nvidia returned about $1 billion to shareholders through $186 million in cash dividends and $814 million in share buybacks. From the fourth quarter of fiscal 2013 to fiscal 2015, the company returned about $2.2 billion to its shareholders, representing roughly 111% of free cash flow for this time period. In 4Q15, Nvidia repurchased 0.2 million shares.

Consider investing in the VanEck Vectors Semiconductor ETF (SMH) and the PowerShares QQQ Trust (QQQ) to gain exposure to Nvidia. The company makes up about 1.94% of SMH and roughly 0.22% of QQQ.

As the chart above shows, Nvidia’s cash balance has steadily increased from $0.7 billion to $4.6 billion over the past six fiscal years owing to strong cash flow generation. Cash accounts for roughly 38% of Nvidia’s market cap of about $12 billion.

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Cash, debt, and cash flows

In 4Q15, Nvidia recorded $4.64 billion in cash and cash equivalents. The company’s long-term debt stood at $1.398 billion. FCF (or free cash flow) and GAAP (or generally accepted accounting principles) cash flow from operations stood at $412 million and $442.7 million, respectively. For fiscal 2015, FCF and cash flow from operations were $783 million and $906 million, respectively.

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