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NVIDIA (NVDA) to Split Stock in Four to Attract More Investors
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NVIDIA (NVDA - Free Report) recently declared a four-for-one common stock split in the form of a stock dividend, increasing the number of authorized shares of common stock to 4 billion.
The process of stockholder approval for the stock dividend will be held virtually on Jun 3, at the company’s 2021 Annual Meeting of Stockholders. If approved, each NVIDIA shareholder will receive three additional shares for every share held as of Jun 21. These dividend shares will be distributed after the market closes on Jul 19.
NVIDIA’s shares are expected to start trading on a stock split-adjusted basis from Jul 20.
The motive behind the stock split is to make the company’s stock more affordable to employees and retail investors, thus boosting demand for NVIDIA’s shares. This, in turn, should push share prices up again.
Notably, the company’s shares have returned a massive 1227.5% in the past five years, strongly outperforming the industry’s five-year growth of 270.3%.
5-Year Price Performace
NVIDIA’s efforts to boost shareholder value are noteworthy. Notably, it is a cash-rich company with a strong balance sheet. As of Jan 31, 2021, the company had cash and cash equivalents of nearly $11.56 billion, which is significantly higher than its total debt of $5.96 billion. Since it has net cash available on its balance sheet, the existing cash can be used for pursuing strategic acquisitions, investment in growth initiatives and distribution to shareholders.
NVIDIA boasts a sturdy cash-flow generating ability. The company’s accelerated revenue growth along with improving operating efficiency is bringing in higher cash flows. The higher cash flow generating ability lends NVIDIA the flexibility to invest in long-term growth prospects and return money to its shareholders. Notably, the company returned approximately $6 billion to shareholders through dividend payments and share buybacks in the last five fiscals. In fiscal 2021, NVIDIA paid out dividends of $395 million. Moreover, NVIDIA is evaluating the timing of resuming share repurchases. The company is currently authorized to repurchase up to $7.24 billion in shares through December 2022.
Conclusion
NVIDIA's stock trades at a one-year forward P/E of 42.3X compared with its five-year average of 38.5X. Nonetheless, NVIDIA trades at a massive premium to the semiconductor industry’s forward P/E multiple of 23.5X. Therefore, many would argue that the stock is a risky bet. However, we beg to differ due to its consistent financial performance and strong growth opportunities in various untapped markets like automotive, healthcare and manufacturing over the long term.
The long-term earnings growth rate for Silicon Motion Technology Corporation, Lam Research and LG Display is currently pegged at 8%, 32.8% and 32.56%, respectively.
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NVIDIA (NVDA) to Split Stock in Four to Attract More Investors
NVIDIA (NVDA - Free Report) recently declared a four-for-one common stock split in the form of a stock dividend, increasing the number of authorized shares of common stock to 4 billion.
The process of stockholder approval for the stock dividend will be held virtually on Jun 3, at the company’s 2021 Annual Meeting of Stockholders. If approved, each NVIDIA shareholder will receive three additional shares for every share held as of Jun 21. These dividend shares will be distributed after the market closes on Jul 19.
NVIDIA’s shares are expected to start trading on a stock split-adjusted basis from Jul 20.
The motive behind the stock split is to make the company’s stock more affordable to employees and retail investors, thus boosting demand for NVIDIA’s shares. This, in turn, should push share prices up again.
Notably, the company’s shares have returned a massive 1227.5% in the past five years, strongly outperforming the industry’s five-year growth of 270.3%.
5-Year Price Performace
NVIDIA’s efforts to boost shareholder value are noteworthy. Notably, it is a cash-rich company with a strong balance sheet. As of Jan 31, 2021, the company had cash and cash equivalents of nearly $11.56 billion, which is significantly higher than its total debt of $5.96 billion. Since it has net cash available on its balance sheet, the existing cash can be used for pursuing strategic acquisitions, investment in growth initiatives and distribution to shareholders.
NVIDIA boasts a sturdy cash-flow generating ability. The company’s accelerated revenue growth along with improving operating efficiency is bringing in higher cash flows. The higher cash flow generating ability lends NVIDIA the flexibility to invest in long-term growth prospects and return money to its shareholders. Notably, the company returned approximately $6 billion to shareholders through dividend payments and share buybacks in the last five fiscals. In fiscal 2021, NVIDIA paid out dividends of $395 million. Moreover, NVIDIA is evaluating the timing of resuming share repurchases. The company is currently authorized to repurchase up to $7.24 billion in shares through December 2022.
Conclusion
NVIDIA's stock trades at a one-year forward P/E of 42.3X compared with its five-year average of 38.5X. Nonetheless, NVIDIA trades at a massive premium to the semiconductor industry’s forward P/E multiple of 23.5X. Therefore, many would argue that the stock is a risky bet. However, we beg to differ due to its consistent financial performance and strong growth opportunities in various untapped markets like automotive, healthcare and manufacturing over the long term.
Zacks Rank & Other Stocks to Consider
NVIDIA currently carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the broader technology sector include Silicon Motion Technology Corporation (SIMO - Free Report) , Lam Research Corporation (LRCX - Free Report) and LG Display Co., Ltd. (LPL - Free Report) , all sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Silicon Motion Technology Corporation, Lam Research and LG Display is currently pegged at 8%, 32.8% and 32.56%, respectively.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
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