Behold Nvidia’s Penny Dividend. Is It Telling Us Something?
Nov 21, 2025 01:30:00 -0500 by Jack Hough | #Dividends #Streetwise
Nvidia’s skimpy dividend tells a broader stock market story. (SeongJoon Cho/Bloomberg)
Nvidia’s quarterly report answered the question absolutely no one was asking. It was right there on page one, next to the part where sales of artificial-intelligence chips blew past estimates by billions of dollars. Nvidia, we also learned, will leave its dividend unchanged.
I’ll pause here for general gasping and shrieking, and murmurs of, “Wait, there’s a dividend?”
Your browser does not support the audio tag.
Barron’s Streetwise
00:00 / 27:14
1x
Subscribe
There is. In fact, Nvidia used to be a decent yielder, and November used to be payment-raising time. After years of stunning stock price gains, splits, and no dividend raises, the payment is a penny a share per quarter, for a yield of 0.0002%, the lowest in the S&P 500. Not that shareholders are complaining—they’ve made 24,000% in a decade.
Why am I calling attention to a penny? Because Nvidia’s dividend tells a broader stock market story. Companies have skimped on dividends amid an epic bull run for stock prices, leaving the S&P 500’s yield of just 1.1% looking like finance’s vestigial tailbone—an evolutionary holdover without a clear purpose. This has happened once before, and it didn’t end gently for investors.
Dividends are meant to be more than an important part of total returns. The payments tend to hold up much better than paper earnings during market crashes, giving savers income to ride out recessions and layoffs, and a means of reinvesting at lower prices.
Let me explain, and at the risk of coming across like a guy building an ark in the desert, offer options for adding dividends at a time of relative scarcity. I’ll have to bounce around a little, but don’t worry: I’ll try to keep it to the past 425 years.
January 1999: Nvidia goes public during a swelling dot-com stock bubble. Dividends are out of fashion. Easy price gains have left investors content to watch companies reinvest their capital into building out the internet economy. The S&P 500’s yield will soon bottom out around 1.1%, and payments will fall below one-third of earnings, versus an average over the past century of more than one-half. When the bubble pops, the S&P 500 will lose nearly half its value, and the Nasdaq Composite, more than three-quarters. It will take the Nasdaq, which doesn’t include dividends, 15 years to get back to its 2000 peak.
November 2012: Nvidia reports quarterly earnings. There is no mention of AI, only videogaming, plus a side hustle in supercomputing, and an effort to grow in mobile devices. Results are decent, and there is a rising cash balance, but the stock price is wallowing at less than half its 2007 high. Dividends are cool again, so the company launches one chunky enough to put its yield at 2.4%. The stock gains 8%.
March 1602: Trading companies merge to create Vereenigde Oostindische Compagnie, also known as Dutch East India Company. Joint stock companies that came before it raised fresh capital for each trading voyage, and split the winnings at the dock. Dutch East pioneered dividends, allowing some capital to be retained and recycled. Perpetual stock needed a venue for trading, so the first exchange was created, in Amsterdam. In other words, dividends gave birth to the stock market, not the other way around. Modern accounting and investor trust have reduced dividends to a sideshow, but they used to be the whole point.
November 2019: For the first time since launching its dividend, Nvidia doesn’t give shareholders a November raise. Its stock price has been rocketing higher for years on a growing realization that the highly parallel computing used to draw videogame pixels is a good fit for AI, too. The earnings call is filled with mentions of AI and hyperscale data centers. Dividends don’t come up.
By now it’s fair to ask: Who cares? Nvidia has spent massively on stock buybacks—although not enough to meaningfully reduce its share count. More importantly, the S&P 500 has returned 278% over the past decade, beating the S&P 500 Dividend Aristocrats, a subset of companies with many years of raising payments, by more than 100 points. But that is partly to do with recent valuation bloat. The S&P 500 has plumped up to 25 times projected earnings from 19 times three years ago. If you invested in the Aristocrats index at inception just over 20 years ago, and checked three years ago, you would have made 402%, and beaten the S&P 500 by 80 points.
That’s no anomaly. From 1973 through the end of last year, companies that grew or initiated dividends returned an average of 10.2% a year, versus 4.3% for nonpayers and negative returns for dividend cutters and quitters, according to data compiled by Hartford Funds. Since 1960, dividends have contributed 85% of the S&P 500’s total returns, such is the long-term power of compounding.
The intermediate-term power isn’t bad, either; dividends have kicked in 34% of total returns during the average decade since 1940. And during big downturns since 1975, dividend payers lost only 14.4% on average, versus 19.9% for the S&P 500, and 28.2% for nonpayers.
S&P 500 dividends as a percentage of earnings are about to breach the dot-com bubble low. Investors looking to buck the trend can complement their index funds with something like the ProShares S&P 500 Dividend Aristocrats exchange-traded fund, which yields 2.2% and costs 0.35% a year. Better yet, there’s the Schwab US Dividend Equity ETF, which screens for sustainable yield using a more rigorous approach. It yields 3.8% and costs 0.06%, with a portfolio price/earnings ratio of 16.7.
I’m not predicting a market crash. Wait: I’m definitely predicting one. I just don’t know whether it will be next week or many years from now. When it happens, expect investors to grow more demanding on dividends. Wall Street estimates that Nvidia will generate over $93 billion in free cash this year, and $151 billion next year, after around $5.5 billion in yearly capital spending. Its dividend costs about $1 billion. Maybe it’s time for a raise.
Write to Jack Hough at jack.hough@barrons.com. Follow him on X and subscribe to his Barron’s Streetwise podcast.