Bank of America Urges Nvidia to Lift Dividend Yield to 1% via $51B Plan
Bank of America analysts note Nvidia trades at a 50% P/E discount to Magnificent Seven peers (26x/19x 2026–27 vs 49x/41.5x average) despite forecast free cash flow of over $400 billion in 2026–27. They recommend boosting the 0.02% dividend to 0.5–1% via a $26–51 billion payout to attract income funds and narrow the valuation gap.
1. Valuation Discrepancy and Peer Comparison
Despite a $5.08 trillion market cap, Nvidia’s 26x 2026 and 19x 2027 P/E multiples sit roughly 50% below the Magnificent Seven peer average of 49x and 41.5x. On a free cash flow basis, projected $400 billion over 2026–27 leaves Nvidia trading at a roughly 30% lower market cap‐to‐FCF multiple than Apple and Microsoft combined.
2. Shareholder Return Proposal
Nvidia’s near-zero 0.02% dividend yield limits inclusion in income‐oriented portfolios, with just 16% of equity income funds holding shares versus a 32% peer average. Analysts propose lifting yield to 0.5–1%, matching Apple’s 0.4% and Microsoft’s 0.8%, at a cost of $26–51 billion, or 15–30% of 2026 free cash flow.
3. Historical Returns Shortfall
Over the past three years, Nvidia has returned just 47% of free cash flow via dividends and buybacks, well below the roughly 80% peer average and its own 82% rate from 2013 to 2022, highlighting room to increase capital returns.