NVDA is a strong long-term dividend growth play due to low payout ratio enabling high dividend hikes and superior valuation vs sector average.

I think that when people think about the AI revolution, they usually think about Nvidia designing graphics processing units or TSMC manufacturing them.

Okay, moving on to the second purchase, we have one of the most popular stocks in the market, yet most investors don't realize that they also pay fast-growing dividends. It is the king of the artificial intelligence revolution, Nvidia (trading symbol NVDA), into which BlackRock poured an incredible additional $3.1 billion last quarter.

If you asked most investors why they own Nvidia stock, 99% of them would tell you it's purely for capital appreciation, the stock price itself, tremendous business growth, and the fact that they are so dominant and the stock continues to rise to record levels.

This is really what fuels most of the hype and fear of missing out on this stock.

The reason again is that the return is very small at the moment, amounting to only about half a percent, as exactly one dollar is paid annually for each share you own. But here lies the power of investing in dividend growth, because Nvidia's dividend payout ratio is still surprisingly low, representing less than 4% of their profits.

Large dividend-paying companies often pay out around 50%, 60%, or even 70% or more of their profits just to maintain their dividends. But because Nvidia's percentage is very low, it is sometimes able to increase it at enormous growth rates.

In fact, they just did it recently by raising their quarterly dividends from one cent to 25 cents, which is a 25-fold increase, as if it happened out of nowhere. Again, it is easy to do this when the distributions are small to begin with, but I would argue that even here, the ratio is still very small, and could easily be doubled or tripled or more in the coming years.

Frankly, with the speed at which their cash flows are growing, they could even increase these dividend payouts fivefold without any trouble.

Ten years ago, the stock was trading at less than two dollars per share. So, if you take the $1 dividend they currently pay per share, you would end up with a dividend yield of over 50%, or a yield of 56%. It's absolutely crazy.

With Nvidia, it's a bit more complicated; Perhaps 10 years ago you wouldn't have expected that to happen at all, but the point is that over time, if you give it years. If you feel that this company will increase its dividends over time, which is a belief I fully justify for Nvidia, given that they are already paying out, their dividends are very small, and they can easily afford them, then you can certainly say that they will continue to increase them in the future, making it a strong stock to invest in for dividend growth.

Once again, it really comes down to the core of their business, where they simply continue to impose their dominance on the competitors. I think Wall Street used to view Nvidia as just a video game and AI graphics company, but today CEO Jensen Huang and his team are building integrated computing factories, where their KODA software ecosystem is so deeply connected to customers that switching to a competitor is currently out of the question.

With their new Vera Rubin platform, Nvidia is no longer relying solely on graphics processing units (GPUs), but has begun rolling out their first standalone central processing units (CPUs) to power the next wave of AI agents.

This will directly target a market estimated at hundreds of billions, as they already expect to generate $20 billion in new sales from this source alone. Over the past year, revenues and net income have practically doubled, with analysts predicting that free cash flow will reach a shocking figure exceeding 400 billion in the coming years.

I mean, we're talking about unprecedented numbers here, which is why, despite the high share price, the actual intrinsic valuation, when compared to the soaring earnings, is actually more than 60% cheaper than the sector average, if you can believe it.

So, Nvidia was already one of my favorite stocks for the future, and now with the potential for their dividends to rise even further in the future, this could be a promising dividend growth investment opportunity that many long-term investors have overlooked.

So, yes, they are easily climbing the rankings here. I would put them in second place for now.

, just like Nvidia,

Honestly, I would have put Microsoft at the top of our list if it weren't for the huge difference in rating compared to Nvidia. Because of that now, yes, the rating isn't as attractive as it used to be, but you know, Nvidia is much cheaper.

Microsoft is still very good if you look at it on a GAAP basis, and even slightly cheaper in terms of price-to-earnings ratio, but when looking specifically at the price-to- earnings-to- growth (PEG) ratio, Nvidia is much cheaper according to this metric.

Since this video is more growth-oriented, I think Nvidia has a slight edge over Microsoft in this aspect. Therefore, we will elevate Nvidia to the top spot .

I can understand the reasons for putting either of them in first place, but again, I think, because this video focuses on growth, Nvidia may have the advantage.

It is powered by more than a thousand next-generation " Blackwell" graphics processing units from Nvidia.

Now, I like Lily a lot and would give it preference over KLA, but I can't rank it on the same level as companies like Nvidia, Microsoft, or Broadcom, which I trust a little more and which are in my portfolio.