Nvidia (NVDA +0.87%) and Meta Platforms (META 0.82%) are two of the most successful technology companies in the world. However, these tech titans have historically had very different approaches to rewarding their shareholders. For instance, Nvidia has been paying a quarterly dividend since its fiscal 2012 year, while Meta Platforms will pay its first dividend in March 2024.
Which one is the better dividend stock? Let's compare them based on some key metrics to find out.
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A comparison of key financial metrics
Revenue growth: Both companies have been increasing their revenue at breakneck rates, but Nvidia has been faster in recent history. In the past five years, Nvidia's revenue has skyrocketed 147%, while Meta's revenue has jumped 90.8%. Nvidia's revenue growth has been driven by strong demand for its graphics processing units (GPUs) in the gaming, data center, artificial intelligence, and automotive markets. Meta's revenue growth has been fueled by its dominant position in social media, online advertising, and virtual reality.
META Revenue (Annual) data by YCharts
EPS growth: Nvidia has also been more profitable than Meta over the past five years, as measured by diluted normalized earnings per share (EPS). Over this period, Nvidia's EPS has soared by 473%, while Meta's EPS has risen by 123%. Nvidia's EPS growth has benefited from its high-margin GPU business and efficient capital allocation. Meta's EPS expansion has been hampered by its high operating expenses stemming from its build-out of the metaverse. Still, the social media company's five-year EPS growth is impressive, even though it doesn't compare favorably to Nvidia's scorching bottom-line growth over this time frame.
META Normalized Diluted EPS (TTM) data by YCharts
EPS growth outlook: Looking ahead, both companies are expected to increase their EPS at robust rates, but Nvidia is the clear winner on this metric. According to analysts' estimates, Nvidia's EPS ought to rise by a whopping 71.6% in fiscal 2025. Meta, on the other hand, is expected to post EPS growth of 15.1% in calender year 2025. Nvidia's bottom line is booming due to the explosion in demand for chips capable of handling generative artificial intelligence (AI) workloads.
Revenue growth outlook: Similarly, both companies are projected to increase their revenue at healthy rates, but Nvidia wins again on this metric as well. Analysts forecast Nvidia's revenue will climb 59.5% in fiscal 2025. That easily trumps Meta's projected revenue boost of 12.4% in calendar year 2025. In absolute terms, though, Meta's double-digit revenue growth forecast is impressive in its own right.
NASDAQ: META
Key Data Points
Valuation: Thanks to their stellar growth profiles, both companies have earned a premium valuation. Nvidia's stock is presently trading at 35.5 times projected earnings, while while Meta's shares trade for 23.3 times forward earnings. For reference, the S&P 500 index sports a forward-looking price-to-earnings ratio of 22.9 at the time of this writing. As such, Nvidia and Meta are both expensive relative to the broader market, but Meta stock has the more compelling valuation.
NASDAQ: NVDA
Key Data Points
Dividend yield: One of the main attractions of dividend stocks is their yield, which measures how much income they generate for investors relative to their share price. Currently, Nvidia has a tiny dividend yield of just 0.02%. Meta's annualized yield stands at 0.43%. Meta thus offers the richer dividend of the two.
Debt-to-equity ratio: This is a measure of financial leverage that compares how much debt a business uses to finance its assets relative to its equity. This metric is also a proxy for the health of a company's balance sheet. A lower ratio indicates less reliance on debt and more financial stability. Nvidia has a debt-to-equity ratio of 33.1%, indicating a robust balance sheet. Meta, for its part, sports a debt-to-equity ratio of 24.7%. Overall, both companies have strong balance sheets, which is a great sign in terms of the reliability of their cash distributions to shareholders.
Verdict
Based on these metrics, Nvidia is a better dividend stock than Meta Platforms. While Meta has a higher dividend yield, Nvidia has a much faster EPS growth rate and it is a critical player in AI architecture. Nvidia's dividend may be small, but it is likely to rise steadily over time, along with its earnings. Meta's dividend may be larger, but the company is more vulnerable to regulatory and competitive headwinds. Hence, dividend investors may want to opt for Nvidia over Meta Platforms.
