Prediction: Nvidia Will Make a Substantial Dividend Increase in 2026. Should You Buy the Stock?

Core Viewpoint - Nvidia is expected to utilize at least 50% of its free cash flow (FCF) for shareholder returns through buybacks and dividends, particularly in the latter half of the fiscal year [2][3]. Financial Performance - In fiscal 2026, Nvidia reported $215.9 billion in revenue and $96.6 billion in FCF, allocating $41.1 billion for stock buybacks and dividends, which is 42.6% of its FCF [3]. - Analyst estimates predict earnings per share of $8.28 for fiscal 2027, a 69% increase from $4.90 in fiscal 2026, suggesting a potential FCF of $163.3 billion for fiscal 2027, leading to over $80 billion in buybacks and dividends [4]. Dividend Strategy - Currently, Nvidia pays a quarterly dividend of $0.01 per share, costing $974 million in fiscal 2026, with most capital returns directed towards buybacks [5]. - The significant projected FCF and trends among other major tech companies indicate a strong case for Nvidia to increase its dividend [6]. Business Model Evolution - Nvidia's software is integrated into its hardware solutions, which positions the company to benefit from a shift towards recurring revenue through AI deployment rather than relying solely on hardware sales [9][10]. - The transition to an inferencing model allows Nvidia to generate recurring revenue from enterprise software, support contracts, and licensing, reducing dependence on hardware sales [11][12]. Investor Attraction - Implementing a dividend could attract a broader investor base, particularly those seeking passive income, and could lead to regular annual increases in dividends similar to practices by Microsoft and Apple [13].