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Why NVIDIA Was Able to Sweeten Its Dividends

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Quarterly dividend hiked 7.0%

At the time of its fiscal 3Q18 earnings release on November 9, NVIDIA Corporation (NVDA) also announced that it was hiking its quarterly cash dividend by 7.0%.

As a result, in the next dividend payout, NVIDIA shareholders would realize a cash dividend of $0.15 per share as opposed to $0.14 per share distributed in the previous payout. NVIDIA plans to distribute the next dividend on December 15, 2017.

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Free cash flow rose sharply

NVIDIA announced its dividend hike after reporting a sharp increase in free cash flow in fiscal 3Q18. The company generated free cash flow of $1.1 billion in fiscal 3Q18, compared to free cash flow of $650.0 million in the previous quarter.

As a result, NVIDIA exited fiscal 3Q18 in a stronger cash position than when it started the quarter. The company’s cash balance was more than $6.3 billion at the end of fiscal 3Q18, compared with $5.9 billion at the end of fiscal 2Q18, implying that NVIDIA’s cash balance grew 6.8% sequentially.

NVIDIA’s semiconductor rivals Qualcomm (QCOM), Microchip Technology (MCHP), and Advanced Micro Devices (AMD) increased their cash balances 78.4%, 8.3%, and 4.1% sequentially, respectively, in their latest quarters. Intel’s (INTC) cash balance decreased 32.4% sequentially in 3Q17

NVIDIA’s capital return plan

In addition to declaring a dividend boost, NVIDIA also announced plans to return ~$1.3 billion to shareholders through a combination of dividends and share repurchases in fiscal 2019.

So far in fiscal 2018, NVIDIA has returned ~$1.2 billion to shareholders in dividends and share repurchases. The company is aiming to return ~$1.3 billion by the end of the fiscal year.

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