SANTA CLARA, CALIFORNIA – MAY 21: A sign is posted in front of Nvidia headquarters on May 21, 2024 in Santa Clara, California. Chip maker Nvidia will report first quarter earnings on Wednesday, May 22nd. (Photo by Justin Sullivan/Getty Images)
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Over the past ten years, NVIDIA (NVDA) stock has delivered a remarkable $83 Bil back to its investors in the form of cash via dividends and buybacks. Let’s examine some figures and see how this distribution capacity compares to the largest capital-return initiatives in the market.
Interestingly, NVDA stock ranks as having the 24th highest return to shareholders in history.
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Why should you care? Because dividends and share repurchases provide immediate, tangible returns of capital to investors. They also demonstrate the management’s confidence in the company’s financial viability and capacity to produce consistent cash flows. There are additional stocks that share this characteristic. Below is a list of the ten leading companies ranked by total capital returned to shareholders through dividends and stock repurchases.
Opting for asset allocation is a wiser strategy than merely selecting stocks. The asset allocation tactics employed by Trefis’ Boston-based wealth management associate generated favorable returns during the 2008-09 period when the S&P tumbled over 40%. Presently, Trefis High Quality Portfolio is included in that.
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Top 10 Stocks By Total Shareholder Return
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For the complete ranking, visit Buybacks & Dividends Ranking
What do you notice here? The total capital returned to shareholders as a percentage of the current market cap seems inversely related to growth opportunities for reinvestments. Companies such as Meta (META) and Microsoft (MSFT) are expanding at a much faster and more predictable rate than the others, yet they have returned a smaller portion of their market cap to shareholders.
That is the downside of high capital returns. While they are appealing, you must ponder the question: Am I forgoing growth and sound fundamentals? With this in mind, let’s examine some figures for NVDA. (see Buy or Sell NVIDIA Stock for additional details)
NVIDIA Fundamentals
- Revenue Growth: 71.6% LTM and 92.0% last 3-year average.
- Cash Generation: Almost 43.6% free cash flow margin and 58.1% operating margin LTM.
- Recent Revenue Shocks: The lowest annual revenue growth in the last 3 years for NVDA was 9.9%.
- Valuation: NVIDIA stock is trading at a P/E ratio of 52.9
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*LTM: Last Twelve Months
That provides a useful overview; however, assessing a stock from an investment standpoint involves much more. This is precisely what Trefis High Quality Portfolio achieves. It aims to mitigate stock-specific risks while providing upside potential.
NVDA Historical Risk
NVIDIA is not shielded from significant sell-offs. The stock dropped 85% during the Global Financial Crisis and sustained a 68% decrease in the Dot-Com collapse. The 2018 correction and inflation shock each eliminated over 55% from its peak. The Covid dip also reduced its value by approximately 38%. Strong fundamentals count, but when the market faces turbulence, NVDA still experiences the fallout.
However, the risk is not confined to major market downturns. Stocks can decline even during favorable market conditions—consider occurrences such as earnings releases, business updates, and outlook modifications. Check NVDA Dip Buyer Analyses to review how the stock has bounced back from sharp declines in the past.
The Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has a history of comfortably outpacing its benchmark across all 3— the S&P 500, S&P mid-cap, and Russell 2000 indices. What is the reason? Collectively, HQ Portfolio stocks have yielded superior returns with reduced risk compared to the benchmark index; offering a smoother experience, as highlighted in HQ Portfolio performance metrics.