Nvidia Returned $26 Billion to Shareholders Last Quarter Alone. Here's What That Buys You as an Investor.

Nvidia's (NASDAQ: NVDA) report for the second quarter of its 2027 fiscal year showed that the company is still enjoying incredible growth in conjunction with artificial intelligence (AI) demand trends. The fiscal quarter, which wrapped on July 26, saw the business record non-GAAP (adjusted) earnings per share of $2.22 on revenue of $96.22 billion. For reference, the average analyst estimate had modeled adjusted per-share earnings of $2.10 on revenue of $92.17 billion.

Along with its fiscal Q2 report, Nvidia also announced that it had returned $26 billion to shareholders in the quarter -- with $20 billion coming in the form of buybacks and $6 billion in the form of dividend payments. What does that mean for shareholders?

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How should investors view Nvidia's dividend right now?

With the first-quarter report it published in May, Nvidia announced it was raising its quarterly dividend to $0.25 per share -- marking a 2,400% increase. While the payout increase is huge on a percentage basis and substantially boosts returned income as a component of owning Nvidia stock, the dividend payout still isn't big enough to make a huge difference in the near term.

For example, the company's dividend payout in the second quarter would have come out to $250 if you owned 1,000 shares of Nvidia stock. If you had your dividends set up to be rolled into new stock purchases through a dividend reinvestment program (DRIP), it would have added another full share and some change to your holdings.

To put things in perspective, 1,000 shares of Nvidia would be worth roughly $226,000 as of this writing. In other words, $250 worth of dividend payments on a position of that size is far from being a game changer. In the near term, it won't buy you much.

On the other hand, there is potential for the company's dividend payouts and enrollment in a DRIP to make a real difference over the long term. Nvidia's dramatic payout increase earlier this year suggests that the company is interested in making dividends a meaningful component of stock ownership, and it wouldn't be surprising to see the company deliver another meaningful payout next year.

The potential hike probably won't be anywhere close to this year's 2,400% raise, but it doesn't have to be. With the stock's dividend yield currently sitting at roughly 0.4%, the payout is still relatively small compared to the company's current share price -- but there's still big potential for its dividend program to reward long-term shareholders.

What do Nvidia's buybacks mean for investors?

Nvidia bought back $20 billion worth of shares in fiscal Q2 -- a figure that might look massive at first glance, but one that should be viewed in the context of the company's overall size. With Nvidia's market capitalization currently sitting at roughly $5.44 trillion, the company's $20 billion buyback doesn't look particularly significant as a one-off event.

The shares that Nvidia bought back last quarter were retired, which reduces the company's total shares outstanding -- and increases earnings per share due to the lower share count. With the company issuing roughly $4 billion in shares to employees as part of its stock-based compensation plans in the quarter, the net size of its buybacks in the quarter is actually around $16 billion. Taken in isolation, this net buyback amount looks relatively small -- but the good news is that Nvidia is still reducing its share count even after accounting for stock-based compensation.

Nvidia's business is hugely profitable thanks to its category-leading artificial intelligence hardware and software, and the company doesn't need to rely on stock sales to fund its operations. The buybacks in Q2 aren't a game changer, but the AI leader still has roughly $99 billion in authorizations for additional buybacks -- and it could move to repurchase shares more aggressively if it comes to think that the valuation picture becomes substantially more attractive.

What's $26 billion in the grand scheme of things?

Returned income isn't a central component of Nvidia stock ownership right now. While that could change in the coming years, the company is still very much in growth mode. Using its cash generation to fund internal development, acquisitions, and investments is probably a much better use of capital than returning money to shareholders, so the relatively small significance of $26 billion in returned income last quarter shouldn't be taken as a negative.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.