Does a 2,400% dividend increase signal Nvidia stock’s growth prospects are slowing?

How does a 2,400% dividend increase sound to you? Many investors would think all their Christmases have come at once if such a thing happened. But that is exactly what US chip giant Nvidia (NASDAQ: NVDA) announced last week – and its stock actually moved down slightly in response.

What is going on?

It’s all about perspective

Do you remember as a child being challenged to fold a piece of paper, then fold it again, and again – more than seven times?

Easy sounding for the uninitiated, but impossible in practice.

What about a 2,400% dividend increase?

Do that for seven years on the trot and the cumulative increase would be… well, never mind. Do the calculation yourself to see what I see on my pocket calculator – and trust me, it is a very big number.

Clearly, this sort of dividend growth is exceptional, even for an exceptional share like Nvidia. I see it as a one-off, not setting a new norm.

Nvidia’s share price growth (the stock is up 1,358% in five years) had left the dividend yield at a paltry 0.02%.

So the massive increase announced last week will simply push the yield up to 0.5%. That is far more attractive than what it was before, but still unremarkable.

Where does Nvidia go from here?

The reason Nvidia can afford to reward its stockholders so handsomely is simple: it is currently producing a gusher of cash.

In its most recent quarter, the company’s net cash flow from operating activities…