DividendsAs a financial professional who has had ample training and experience in the world of finance, I have to wonder about the ultimate goals of NVidia. The company pays a 4 cent dividend despite being the most valuable company in the world per market cap. It appears that the company has no apparent aims to ever pay a respectable dividend as their current dividend is for all intents and purposes zero.
Anyone who understands business, the stock market and financial theory will know that a company exists in order to generate profits for their owners (i. e. shareholders). Profits are returned to the company via dividends. The intrinsic value of a stock is the NPV using DCF (discounted cash flow) of future streams of dividend payments. If NVidida has no plans to share the company wealth with their owners, what IS the purpose of the company then? If the company plans to never pay dividends, the intrinsic value of the shares would be something close to zero!
Oh, some will say the purpose of the company is to grow perpetually and generate ever more earnings so that the stock price can continue to rise and to cash in on capital gains. So, NVidia investors are buying stock in a company which will never pay them in hopes that they can sell the shares down the road to other investors who will hope that they can repeat the process over and over?
The company will grow larger and larger, cash will stay within the company to enrich the execs with all their perks and the shareholders are left only with hopes of capital gains continually trading shares between themselves. This sounds a bit like the "greater fools theory" to me. Folks purchasing shares with no hopes of dividends because they believe they will be able to pawn the shares off on the next fool, er "investor" down the road.
Hey, if this floats your boat go for it. Just be aware of what you are "investing" in.