IMAGE SOURCE: NVIDIA.
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Shares of NVIDIA Corporation(NASDAQ: NVDA) rose 11.7% in the month of September,according to data provided byS&P Global Market Intelligence, on the heels of both the company's encouraging quarterly report in August, and indications of its efforts to continue rewarding shareholders with generous capital returns.
First, NVIDIA's climb didn't happen all at once, which I think is indicative of investors' generally favorable sentiment toward the graphics-chip specialist. Keeping in mind that shares have roughly doubled year to date, NVIDIA absolutely crushed expectations with its second-quarter report on Aug. 11, 2016, showcasing broad strength across its various segments. Automotive revenue, for example, shot up 68% year over year, as NVIDIA's Tegra chips found homes in more in-car infotainment systems across the industry, all while the company continued to secure contracts to implement its cutting-edge self-driving vehicle platform with more manufacturers. And perhaps more importantly, NVIDIA's core GPU business saw revenue increase 25% year over year, driven by strong datacenter and GeForce gaming GPU sales.
Meanwhile, NVIDIA also raised eyebrows a few weeks ago by offering $2 billion in unsecured notes -- a curious move for a company with almost $4.9 billion in cash and equivalents and only $1.5 billion in debt (comprised of 1% convertible senior notes due in 2018, the original purpose of which was primarily to fund share repurchases).
As I wrote at the time, however, NVIDIA revealed it will use the proceeds of that debt -- which will consist of $1 billion of 2.2% notes due in 2021, and $1 billion of 3.2% notes due in 2026 -- to prefund repayment of its existing convertible notes, and for "general corporate purposes" including dividend payments or share repurchases. And becausemost of NVIDIA's cash (around 75%) is held overseas, it would incur a big tax bill if it were to repatriate that cash for the same purpose.
In short, NVIDIA is wisely using its newest debt offering to prepare for the repayment of its notes, while at the same time affording it flexibility to use any remaining funds to expand its capital returns initiatives even more. As a long-term investor myself, I think that's more than enough reason to celebrate owning shares of NVIDIA.
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Steve Symington owns shares of Nvidia. The Motley Fool owns shares of and recommends Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.