Title: Why I'm Holding onto Nintendo as My Unwavering Video Game Stock
Navigating the investing landscape has been a challenge for many, especially for companies like Nintendo (NTDOY -2.30%). Over the past two years, their stocks have seen a 41% plunge from their peak, leaving many investors skittish about console sales, profitability slumps, and currency fluctuations between the Japanese yen and the U.S. dollar. However, the panic may be unwarranted for a company as robust and diversified as Nintendo.
I believe that Wall Street is underestimating this top-tier entertainment company. As for me, I'm placing Nintendo in the "never sell" category of my portfolio. Here's why it continues to be a beacon of success in the video game sector.
An unrivaled collection of beloved characters
Nintendo's strength lies in its enchanting list of intellectual properties, such as Mario, Donkey Kong, Zelda, Metroid, and Pokémon. These cherished characters stand head and shoulders above the competition in the video game industry, with Disney being the only comparable powerhouse across the broader entertainment realm.
By relying on its first-party games and distributing them through its own gaming hardware, Nintendo maintains a high level of control over its products. This strategy has paid off decisively, with Nintendo Switch titles like Mario Odyssey, The Legend of Zelda: Breath of the Wild, and Pokémon Scarlet/Violet exceeding 20 million copies each. Mario Kart 8 has gone even further, selling an extraordinary 52 million copies on the Switch alone. The revenue generated from these bestselling titles fuels the company's financial health without the need for excessive outside reliance.
Diversification beyond the screen
Recognizing the potential of its valuable intellectual property, Nintendo has taken action to extend its reach beyond video games. The company's new initiatives in movies and theme parks are designed to capture the hearts and minds of its massive fan base in innovative ways, creating fresh revenue streams and bolstering fan engagement.
Debuting next week, The Super Mario Bros. Movie in collaboration with Illumination Entertainment promises an exhilarating visual spectacle, poised to draw millions of adoring Mario fans to theaters worldwide. Nintendo's board of directors has even welcomed Chris Meledandri, the founder and CEO of Illumination, further hinting at an extended partnership and possible future movie collaborations.
Staying true to its commitment to bring lifelong gaming experiences to its devoted fans, Nintendo has also partnered with Universal to develop theme parks across the globe in Japan, Singapore, California, and Florida. The initial success of these attractions has been astounding, drawing in families and eager fans to enjoy immersive experiences centered around their cherished characters.
The financial contribution of these cinematic and theme park endeavors remains to be seen, but the potential benefits to Nintendo's overall appeal are undeniable. While these new revenue streams may not have an immediate substantial impact, they have the potential to generate buzz, strengthen fan loyalty, and drive continued interest in Nintendo's video games and merchandise.
A fiscally responsible corporation
As a Japanese corporation, Nintendo has long been recognized for its diligent financial management, maintaining a robust cash reserve of over $13 billion USD and an impressively clean balance sheet — boasting zero debt. At a current market cap of $45.2 billion, this translates to approximately 29% of the stock's value in the form of readily available cash.
Dividend payments for the last 12 months have been $0.374 per share, providing a trailing dividend yield of upward of 4%. With share prices hovering around $9.60, this payment schedule represents a generous return for shareholders.
Moreover, Nintendo’s strong financial performance enables it to consider increasing dividend payouts in the future, offering an attractive long-term option for investors. Regardless of reinvestment preferences, this consistent dividend will provide investors with a reliable source of income for as long as they choose to hold shares in Nintendo.
Despite the challenges in the investing landscape, some investors remain optimistic about Nintendo's future. In light of the company's robust financial health, rich intellectual property portfolio, and diversification efforts, it could be a wise decision to invest in Nintendo's stocks. For instance, the company's cash reserve of over $13 billion and zero debt, along with a trailing dividend yield of over 4%, make it an attractive option for income-seeking investors.
