NVIDIA earnings are up 18 percent and dividend grows by 18 percent

NVIDIA surprised Wall Street with stronger than expected financial results. The graphics chip designer announced fiscal third quarter 2016 revenue of $1.305 billion, up 7 percent from a year ago, and adjusted net income of $255 million, up 16 percent year-over-year.

Earnings per share (EPS) for the quarter came in at 46 cents, a 18 percent increase versus the same period a year before. Analysts polled by FactSet expected NVIDIA to report earnings of 35 cents per share on revenue of $1.18 billion so it's no surprise that NVIDIA's shares are up 7.36 percent in after-hours trading to a new 52-week high of $29.75.

NVIDIA also announced it's increasing its quarterly dividend by 18 percent to $0.115 per share.

NVIDIA (NASDAQ: NVDA) today reported record revenue for the third quarter ended October 25, 2015, of $1.305 billion, up 7 percent from $1.225 billion a year earlier, and up 13 percent from $1.153 billion in the previous quarter.

GAAP earnings per diluted share for the quarter were $0.44, up 42 percent from $0.31 a year earlier and up from $0.05 in the previous quarter. Non-GAAP earnings per diluted share were $0.46, up 18 percent from $0.39 a year earlier, and up 35 percent from $0.34 in the previous quarter.

"Our record revenue highlights NVIDIA's position at the center of forces that are reshaping our industry," said Jen-Hsun Huang, co-founder and chief executive officer, NVIDIA. "Virtual reality, deep learning, cloud computing and autonomous driving are developing with incredible speed, and we are playing an important role in all of them.

"We continue to make great headway in our strategy of creating specialized visual computing platforms targeted at important growth markets. The opportunities ahead of us have never been more promising," he said.

Capital Return
During the third quarter, NVIDIA paid $53 million in cash dividends and received an additional 4.6 million shares at the close of the accelerated share repurchase agreement that it had entered into in the previous quarter. As a result, the company has returned an aggregate of $604 million to shareholders in the first nine months of the fiscal year. The company intends to return $800 million to shareholders in fiscal 2016.

For fiscal 2017, NVIDIA intends to return approximately $1.0 billion to shareholders through ongoing quarterly cash dividends and share repurchases.

The company announced an 18 percent increase in its quarterly cash dividend to $0.115 per share from $0.0975 per share. NVIDIA will pay this next quarterly cash dividend on December 14, 2015, to all shareholders of record on November 20, 2015.

NVIDIA's outlook for the fourth quarter of fiscal 2016 is as follows:

Revenue is expected to be $1.30 billion, plus or minus two percent.

GAAP and non-GAAP gross margins are expected to be 56.7 percent and 57.0 percent, respectively, plus or minus 50 basis points.

GAAP operating expenses are expected to be approximately $503 million. Non-GAAP operating expenses are expected to be approximately $445 million.

GAAP and non-GAAP tax rates for the fourth quarter of fiscal 2016 are expected to be 20 percent, plus or minus one percent.

The above GAAP outlook amounts exclude restructuring charges, which are expected to be in the range of $25 million to $35 million, in the fourth quarter of fiscal 2016.

Capital expenditures are expected to be approximately $20 million to $30 million.