Today we are going to look into a company that Loco del Dividendo asked us some time ago, and that is interesting to analyze and compare it with other companies in the sector that we have recently analyzed on Dividend Street, such as Activision Blizzard. We are talking about the famous Japanese company Nintendo, owner of such well-known characters as Super Mario or Donkey Kong among others.



One may think that Nintendo is a relatively recent company, given that it is dedicated to the manufacture and sale of video games, but nothing could be further from the truth. The company’s original name was Marufuku, and it was founded in 1889 by a certain Fusajiro Yamauchi as a manufacturer of playing cards for the Japanese game Hanafuda: decks of cards based on the months of the year and without numbers on them, in order to mitigate the famous Japanese fondness for gambling games by making difficult to count the points.

The Japanese were so fond of gambling that for a long time it had been forbidden by the state. For this reason, Nintendo benefited a lot in its beginnings from the Japanese mafia, the Yakuza, which was one of its main customers. Nintendo supplied its illegal casinos with Hanafuda cards. Moreover, it is said that the origin of the name “Yakuza” is a pejorative word, as it sounds just like the worst combination of Hanafuda cards.

In the early twentieth century the company tried to export Japanese playing cards without much success, with limited success in the large South American communities of Japanese origin. Later, World War II provided the company with an opportunity, as it was one of the least affected industries. During the post-war period, the founder’s grandson, Hiroshi Yamauchi, tried to modernize the company and traveled to the USA, where he closed a deal with Walt Disney in 1959 to create playing cards with Disney characters. The success was such that Nintendo went public in 1962 to begin a period of expansion, already with its current name “Nintendo”, which means “leave your luck to heaven”, in a further allusion to the fondness for gambling in Japanese culture.

The company began then to manufacture board games and toys, as well as playing cards, and quickly began to introduce electronic components into them. One of the first examples were pistols and rifles that were sold together with a target that had a built-in light sensor that alerted the player when the gun was aimed correctly. These toys were marketed in the USA and Europe in the 1970s.

At that time, Nintendo also explored many other sectors, such as transportation, food, hospitality… and also video games. The electronic toys were so successful that Nintendo built an alliance with Magnavox Odyssey to distribute in Japan what is considered to be the first video game console in history, which was released in 1972, and in which you could play the well-known game “Pong”, in which with a bar that moves unidirectionally, you have to prevent the ball from touching one of the sides of the screen. This archaic video game console was very successful in Japan, and Nintendo understood that a huge market was born, so they focused in developing video games. In order not to waste time training its employees in the manufacture of such complex and cutting-edge technology components, Nintendo forged an alliance with Mitsubishi Electrics. Together they began manufacturing Nintendo’s first video games. At the same time, Nintendo hired the creative designer Shigeru Miyamoto to lead the development of video games for the consoles. Miyamoto is a celebrity in Japan, for being the creator of the Super Mario Bros and Donkey Kong characters.

In 1980 Nintendo developed the first series of handheld gaming consoles: the Game & Watch. These were electronic devices the size of a small calculator that had a single integrated game. The success of these handheld video games was enormous. At the same time, Nintendo opened a subsidiary in the USA, where the arcade gaming business had exploded: these were large arcade machines placed in commercial premises and in which young people inserted coins to play video games. Nintendo made a strong entry into this business, creating the first multi-level video games. However, Nintendo did not yet have any well-known character as its own brand. They first thought of making games based on characters already known in the US, such as Popeye, but soon realized that they were not going to get the image rights so easily. Therefore, Shigeru Miyamoto showed his creativity by replacing Popeye and Brutus with similar characters: Mario and Donkey Kong. It’s hard to imagine that at the time Shigeru Miyamoto knew that these character variants would outlive the originals by far.

The arcade machines of these characters were so successful in the U.S. that Nintendo even started selling licenses to develop video games of these characters on other platforms, such as the Atari 2600. However, Nintendo did not want to mix his own characters with other companies’ platforms, and therefore developed the Famicom in Japan. As we saw in our previous article about Activision Blizzard, the legal recognition of “3rd Party” companies in the USA, which could develop video games for other companies’ video game platforms, had saturated this market and Nintendo knew how to read this panorama very well. The Famicom served as a pilot test in Japan, to launch the NES a little later in the USA, the company’s flagship console of the 80’s with interchangeable video game cartridges. This video game console gave birth to the first great home video game of Nintendo’s flagship character: Super Mario Bros. A multi-level platforms video game that many of us have played in our childhood.

The NES video game console was so successful that Nintendo decided to implement quotas for “3rd Party” video game developers, thus forcing those who wanted to use the NES to offer a minimum quality, as they could not release unlimited titles. The NES was sold almost at cost price, and Nintendo earned the vast majority of its profits by selling video game cartridges. This platform also saw the release of another well-known video game designed by Shigeru Miyamoto: The Legend of Zelda. To connect more with its audience, Nintendo also launched a Nintendo Power magazine and opened a customer service hotline where users could also ask for tips, or how to get past a level they were stuck on.

But Nintendo’s success did not stop there; a few years later, in 1989, they launched the famous Game Boy, a portable video console inspired by the Game&Watch, but this time with interchangeable cartridges. On this device you could play games like Super Mario, Donkey Kong, Legend of Zelda, and the most popular of all: Tetris. Nintendo obtained the license for this game after a legal battle with Atari, although it was a game of Russian origin. Other companies such as Sega or Atari tried unsuccessfully to overshadow the Game Boy, which consolidated its position as the most popular device in the market. There were those who said that Super Mario was already even more famous than Mickey Mouse in the USA.

Nintendo’s first major competitor was the Sega company, also Japanese, and its flagship character Sonic. Sega’s Megadrive video game console competed with our company’s next best-selling console: the Super Nintendo. These two game consoles were in fierce competition in the 90’s. The rivalry in terms of power and playability was at its peak. That’s why at one point Nintendo turned to Sony to seek help to improve the Super Nintendo. From this collaboration the Playstation was born, and its technological success was such that Sony and Nintendo soon after broke their ties due to disagreements, and Sony launched its first version of the Playstation in 1995. Without knowing it, Nintendo had caused the birth of a new and fierce competitor.

Nintendo’s business model was clear: they tried to flood the market with their game consoles at the lowest possible price and then made money by developing and selling their own games, but mostly by charging commissions for allowing 3rd parties to sell video games on Nintendo devices.

Nintendo’s next big success was the Nintendo 64, which was released in 1996. It was a more powerful game console, focused on developing 3D games. However, the company insisted on keeping the cartridge format, which was more difficult to pirate, while the competition had switched to CD. As a result, many “3rd Party” developers such as Capcom, Konami or Activision switched to producing games for the competition, since the CD had much more capacity to store data and this simplified the life of developers. Sony and its Playstation did not stop growing, leading the market sales in the 90’s, while Nintendo stagnated.

Even so, Mario was already a popular icon, and the prestige of the brand sustained Nintendo’s sales. With a very limited range of games, Nintendo was the only platform to offer Super Mario 64, Mario Kart, The Legend of Zelda, or the Pokémon games.

However, in 2000 Sony released the Playstation 2, which was a boom in sales. Not only because it was technologically superior, but also because it could play DVDs: an all-in-one for family entertainment. Nintendo knew it was lagging behind, and again teamed up with other technology companies such as IBM and Panasonic to launch the GameCube game console in 2001. At the same time, however, another giant entered the video game industry: Microsoft and its Xbox.

This led to a milestone that sounds familiar today: Microsoft’s attempted acquisition of Nintendo. Bill Gates’ company saw itself as being able to compete with Sony on hardware, but they had no chance with the other giants on software. The idea behind this takeover attempt was simple: if Microsoft bought Nintendo, the Americans could focus on developing the best video game console on the market, while the Japanese concentrated on developing their video games and making the most of their flagship characters. However, Nintendo did not even want to listen to the dizzying $25 billion offer. They responded to Bill Gates’ with a humiliating laugh. As we saw in our previous article, Microsoft is now trying this same strategy again with the acquisition of Activision Blizzard. Let’s see if they have more success today with this acquisition, than they had with Nintendo’s 20 years ago.

The global panorama in the world of video games was settling down and each major company was gradually defining its profile and market segment. Sega was losing its leadership, Sony and its Playstation were becoming leaders, Xbox promised to be the video game console with the greatest technological potential given the backing of the all-powerful Microsoft, and Nintendo remained among the elite thanks to the popularity of its characters. In addition, there was one niche in which Nintendo had managed to remain a leader: handheld video game devices. In 2004 it launched the Nintendo DS, successor to the Game Boy, which beat the PSP launched by Sony.

However, the GameCube was less successful than its rivals Playstation 2 or Xbox, and Nintendo had to develop its next big game console in 2006: the Nintendo Wii. The concept of this new platform was that the controller had a motion sensor, so that games were no longer about quickly pressing buttons, and could be played simply by moving the controller. This was a revolution in the market, and the platform was very successful until 2010.

In 2012 Nintendo released a new version of the Wii: the Wii U. In this new version, a screen was integrated into the game console controller, so that games could be played both on a TV screen and in handheld mode. Sometimes even combining the two screens. This device was a failure, and once again Nintendo lagged behind Sony and Microsoft in sales.

However, the Nintendo Wii U served as a precursor to the latest game console that Nintendo launched in 2017: the Nintendo Switch. With this game console Nintendo aimed to unify all of the company’s historical successes, and there is no doubt that they did it. The Nintendo Switch is a video game console that is composed of a portable screen, wireless motion-sensing controllers and a TV dock. Therefore, this game console can be played both in portable mode, as well as on TV, in game mode with motion sensor, or in the purest gamer style of traditional game consoles. It is a device with tremendous versatility and quite powerful. In addition, Nintendo partnered with semiconductor company Nvidia to ensure that the Switch has the most suitable microchips for 3rd party developers.

Since then, the Nintendo Switch has made up a lot of lost ground against its competitors (Playstation 5 and Xbox X/S Series), with a market share of approximately 29% (compared to Sony’s 46% and Microsoft’s 25%). It also broke the record of any video game console sales in its first month. The range of video games that Nintendo Switch has is also far superior to its predecessors, and it is even recently rumored that if the acquisition of Activision Blizzard goes ahead by Microsoft, Nintendo could also have video games such as Call of Duty available on Switch. And it also continues to have exclusive video games of its flagship characters such as Super Mario, Donkey Kong, Zelda, Pokémon…

Another milestone in Nintendo’s recent history was the launch of the mobile video game Pokémon GO in 2016. With this free-to-download game, millions of people started hunting Pokémons around the world using their cell phone’s camera. With an augmented reality system, the video game made the Pokémons appear on the cell phone camera and the game scenario was the real world. Monuments around the planet suddenly became sets for Nintendo’s famous game. This game was also a complete success, bringing Nintendo back to the forefront of global innovation.

The global Health Crisis has not affected Nintendo’s stock price at all. In fact, it has boosted video game companies somewhat artificially. While it is true that the confinements have boosted the video game industry, this temporary situation now has to adjust to the new normality, and we still have to see if people spend as much time on digital entertainment as they did during 2020 and 2021.


Today Nintendo is the 5th largest video game company by market capitalization, behind only Microsoft, Tencent, Sony and Activision Blizzard. However, the first 3 are companies are also involved in many other businesses. If we look at turnover, Nintendo rises to 3rd place on the podium of the world’s largest video game companies, only behind Sony and Microsoft.

Nintendo hardly separates its sales by segments, since almost all of its products are part of an ecosystem. You can’t play Nintendo games without Nintendo game consoles and vice versa. Nintendo is very restrictive with its characters and does not give them away for other platforms.

  • Nintendo Switch: The vast majority of the company’s revenue comes from this segment, which includes both the sale of Nintendo Switch game consoles and all its video games.
  • Other platforms: This segment includes all game consoles and video games for game consoles other than Nintendo Switch.
  • Intellectual Property and Mobile: Nintendo wants to boost this segment, as even if it still represents very little turnover, it may have considerable potential. It is about the exploitation of Nintendo’s intellectual property. This means extrapolating Nintendo’s flagship characters to movies (a Super Mario movie will be released in 2023), theme parks (such as Super Mario World at Universal Studios park in Japan), figurine and toys, merchandising, retail Nintendo stores and mobile apps. This segment can be profitable in its own, but also feed back into the other segments by giving visibility to the Nintendo world.
  • Playing Cards and Others: This is the company’s historical segment, which does not even reach 1% of Sales and is testimonial. But Nintendo continues to detail it in its annual reports.

Nintendo’s sales are very well distributed geographically in America (44%), Europe (25%) and Japan (21%), although it should be noted that the rest of the world only represents 10% of the Sales, and that is a huge field that Nintendo could exploit. Nintendo sells in China in partnership with the giant Tencent and at the moment they focus mainly on mobile and PC games. The Nintendo Switch has been sold in the Asian giant only since 2019 and so far hasn’t had much penetration.

The year 2022 was Nintendo Switch’s sixth year, and it remains the company’s flagship platform. Moreover, it differs from its competition in that it does not seek to be the most powerful game console, but the most versatile. In a world where most family members do not spend much time at home (especially in Japan), versatility allows the Switch to escape being a direct competitor in power of the Xbox or Playstation 5. The advantage of the Switch is that you can play anywhere, you can play with motion-sensor controllers, or in the purest gamer style in front of the big screen. In these 6 years, the company has already sold more than 100 million units of the various models of Nintendo Switch, and at the moment the company records a similar number of active players in the last year, without noticing any downward trend yet.

In addition, Nintendo relies heavily on its intellectual property and relies little on 3rd party developers like Activision Blizzard. Nintendo’s own video game sales (“1st Party”) represent almost 79%. It is important to note that Nintendo’s Sales are supported by both video game consoles and video games: Hardware and Sofware sales are almost equally split.

Nintendo is trying to digitize its platform as much as possible, to rely less and less on the distribution of video games. To do this, it is immersed in a process of enhancing its online store (Nintendo e-Shop) and the Nintendo Switch Online platform. The e-Shop should make much more convenient to buy video games from home, either from PC or from the Switch itself. For Nintendo, it is much more profitable to sell video games this way than through its own or third-party physical store chains. And Nintendo Switch Online platform works on a subscription basis: in exchange for a monthly fee, users can play online with other players, have access to all Nintendo’s historical video games (including older game consoles) and save data online. This platform already has over 36 million subscribers and is a recurring revenue model that Nintendo will undoubtedly want to boost.

However, until very recently Nintendo had lagged far behind in terms of its online platform, so it has decided to form a joint venture in 2023 with the Japanese company DeNA to strengthen the digitization of Nintendo content. Once again, Nintendo is teaming up with a specialized external company to achieve its goals without wasting time.

As for the main shareholders, we find Japanese entities with a high percentage of the capital, such as The Master Trust Bank of Japan (16.54%), Custody Bank of Japan (5.45%), The Bank of Kyoto (4.16%), The Nomura Trust and Banking Co. (3.59%) or the future partner company DeNA (1.50%). There are also some large U.S. entities such as JP Morgan (5.43%) or State Street (1.70%). But Nintendo itself also holds a very significant number of shares in the company, with approximately 10.6% of the capital.

Nintendo’s future success will depend on the success of the Switch and its future devices. The challenge of replicating the success that this platform has had, or even increase it, is enormous. The industry in which Nintendo operates requires constant innovation and development, and always having the latest gaming platform. Will Nintendo be able to sustain the success it has had with the Switch over time? Let’s look at their Financial Statements to see if Nintendo has managed to do so in the recent past.


Nintendo’s Balance Sheet is surprising at first glance because of its large Equity and its huge Cash Position. Let’s take a closer look.

Short-Term Assets and Liabilities

Nintendo’s Liquidity Ratio and Cash Ratio are very high: 3.93 and 2.23 respectively. Moreover, these are the most moderate ratios in the last decade, when Nintendo has had Liquidity Ratios that exceeded 10 times. And this is even without taking into account the company’s short-term investments, which are a lot.

This is a tremendously conservative cash position. While it has a positive side in terms of the interest the company receives on its cash and short-term investments, it also shows a certain inefficiency of the company’s resources.

To get an idea, the cash surplus (counting short-term investments and net of current liabilities) that Nintendo has is approximately ¥1,010 per share, almost one-fifth of the stock price!


Long-Term Assets and Liabilities

It is not necessary to analyze Nintendo’s Debt, since it does not have any. In fact, it has a Net Debt/EBITDA ratio of -2.00 times.

Nor should we be concerned about Goodwill or Intangibles, since they are practically non-existent. As Nintendo has always exploited its own brand without any major acquisition, the value of the brand does not appear on its Balance Sheet.

In addition, the Financial Autonomy is 75% of Total Assets, which shows that Nintendo truly belongs to its shareholders.

Undoubtedly, Nintendo has a very robust balance sheet, and so an excellent Financial Health. The counterpart to this, is that it could really allocate all these semi-idle financial resources to boost the company sales, if it had a clear idea of how to do it and if the profitability was higher than the one it gets for its short-term investments in bonds and stocks.


2) PROFITABILITY: Income Statement 2021


Nintendo’s sales have grown by a spectacular 10.10% on average per year over the past decade. This is especially remarkable for a company with such a long history. However, the big jump in Sales occur around 2016-2017, when the Nintendo Switch is launched.

We have seen in the Introduction that most sales are concentrated on the Nintendo Switch game console and video games (95%). And that Nintendo is making a huge effort to digitize its content. This is especially important for two reasons. First, it cuts out all the middlemen in video game distribution, which should significantly increase margins on video game sales. And secondly, leveraging platforms like Nintendo Switch Online allows for a more recurring revenue stream. Recurring revenues are important for a company like Nintendo, whose sales have historically fluctuated cyclically according to the success of its platforms and the novelty and technological validity of its video games.

While Nintendo has already made a notable effort in this regard, it still has a long way to go, as still more than half of its video game sales are in physical format.

The good news are that active users playing Nintendo Switch have still not stopped growing, and have surpassed 100 million this year.

On the other hand, Nintendo also intends to boost the exploitation of its Intellectual Property. As we have seen, they are going to explore the world of cinema and want to replicate the theme park they have in Japan in Orlando (USA) and Singapore. This type of business feeds back on other segments since, if users become familiar with characters such as Super Mario or Donkey Kong at the movies or theme parks, they are more likely to want to play video games, and vice versa.

In the Q2 2023 report (Nintendo’s fiscal year ends in March), they expect to end the year selling 9.5% fewer Nintendo Switch units and the same units of video games. This is a significant decline, given that 48% of Nintendo’s Sales are in Hardware. However, Nintendo expects revenue to grow slightly (+3.1%) and Net Profit very sharply (+17.6%). As they explain in their report, this is mainly due to the devaluation of the Yen this past year. So, the current year’s growth in Sales will be essentially due to a currency effect, and the large increase in Net Profit will be due to the fact that the higher proportion of Sales in video games than in game consoles will increase the company’s margins.

These are not very promising prospects, especially for European investors, given that the depreciation of the Yen will also affect Nintendo’s accounts. In the next annual financial statements we will see if Nintendo Switch still performs well, or if this decline in sales is warning to Nintendo to accelerate its next innovation in game consoles.



Nintendo reported an excellent Net Margin of 28% in 2022. However, this is a Net Margin that oscillates a lot over the years, along with the success of its game consoles. For example, since 2017 (launch of the Switch) it has ranged between 13% and 28%, undoubtedly very good margins. However, between 2012 and 2016 it oscillated between -7% and 8%, lousy margins and even negative (losses) for several years.


It is difficult to compare the margins of their direct competitors since they are not exclusively dedicated to video games. But roughly, Microsoft always shows net margins above 30% and Sony around 8%.

The “3rd party” video game companies also show very different net margins: Activision Blizzard (31%), Electronic Arts (10%) and Ubisoft (5%).

Nintendo does not detail the Operating Margins of its different segments, but we understand that there is great potential in the Intellectual Property segment, which Nintendo could rely on to boost its Profits. Also, the success in digitizing its content could give a boost to the company’s margins.

Another thing to keep in mind is the Net Margin benefits from Financial Interests. In general, companies tend to have some Debt, whose interests reduce the Net Margin. In the case of Nintendo, it is the other way around: part of the Net Margin is due to the interest generated by its short-term investments and cash interests. If we disregard this effect, Nintendo’s Net Margin would be reduced to 23%.


Sankey Chart:

Profitability Ratios:

ROA: 18% (Net Income/Total Assets)

ROE: 24% (Net Income/Equity)

ROCE: 74% (EBIT/(Equity + Net Debt))

Nintendo’s Profitability Ratios are very high. Again, however, they reflect one of the company’s best years in sales and profits. Previous mediocre years have yielded much worse ratios, even negative in years with losses. We should therefore take these figures with a pinch of salt.

The ROA of 18% indicates that despite having a huge cash position on the balance sheet, the company makes a very good return on its assets. If the company had less cash, this ratio would be even higher.

On the other hand, both ROE and ROCE show very high values, especially with such a high Financial Autonomy (75%).

These ratios show us that Nintendo is a company whose profitability soars when its game consoles are successful: the company does not need to invest more capital after a certain point, since the costs to produce a successful or unsuccessful game console are similar. In the same way, developing video games costs the same whether a few or a lot are sold, especially if they are distributed online. Therefore, we can expect amazing Profitability Ratios when Nintendo’s platforms are successful and mediocre ones when they are not: it is the typical cyclicality of companies that have very few variable costs.


Earnings per Share (EPS)

Nintendo’s EPS has swung wildly over the last decade. Several years show negative EPS. Since the launch of the Switch in 2017, we see a gigantic jump in EPS, and since then EPS has grown at an impressive average annual rate of 36%.

However, this data is so volatile that we should not pay too much attention to yearly averages, but rather to trends. It is very clear that Nintendo makes a lot of money when its platforms (such as the Switch) are successful, and very little when they are not (such as the Wii U).

If we were to go back a few years, we would see that in the period 2007-2010, Nintendo’s EPS was similar to the one of the years 2019-2020, due to the commercial success of the Wii.

In conclusion, Nintendo’s EPS is highly volatile depending on the success of its video game consoles.

On the other hand, let’s remember that Nintendo’s EPS has (and has had during the last decade) a lot of help from its Financial Income, thanks to its idle cash position. So, the EPS would still be lower (or more negative) without it: the EPS of the operating part of the business is somewhat lower.


Dividend per Share (DPS)

Nintendo has been paying dividends for more than 30 years (we have found data since 1989), and has a very clear and explicit dividend policy: the highest value between 33% of EBIT and 50% of Net Profit. Therefore, Nintendo does not have an increasing dividend policy.

However, let’s take a look at Nintendo’s annual dividend per share over the past 16 years.

As we can see, the company is consistent with its policy and adapts the dividend per share to the company’s earnings. We can therefore conclude that, although Nintendo is very transparent with its dividend policy, it is not a reliable dividend, nor a growing one. Its amount will depend on the company’s success year by year.


Payout (Dividends/Net Income):

Nintendo’s payout has been around 50% since 2017, the launch date of the Nintendo Switch, given its very clear dividend payout policy.

Cash Flow

Cash Flow – Maintenance CAPEX

The Cash Flow chart considering only the Maintenance CAPEX confirms us the success of the Nintendo Switch since its launch 2017, triggering its Operating Cash Flow and Free Cash Flow.

It is also notorious to see that independently of their game consoles success, the CAPEX needs of the company are constant and quite small, so when a game console like the Switch is successful, the Free Cash Flow skyrockets.

However, in years when game consoles are not successful, we see that Nintendo shows even negative Free Cash Flows.

In 2022 we see a sharp drop in OCF due to a very significant increase in inventories. However, in the latest Annual Report Nintendo details that this increase in inventories is almost entirely due to the accumulation of raw materials, and not finished products or work-in-progress products. So we understand that it is due once again to the prudence of the company in facing the shortage of chips and the semiconductor supply chains difficulties this past year.


Cash Flow – Total CAPEX (Maintenance + Investment)

If we consider the Total Capex, we appreciate much more volatility. This only indicates that Nintendo is very active in the management of its short-term investment portfolio, given the large size of its cash position.

However, the conclusion is the same: Nintendo is a very prudent company, which tries not to distribute to shareholders more than it generates, and whose CAPEX expenses are very constant, so that its Free Cash Flow soars when one of its game consoles is successful.


Share Repurchases

In October 2022, Nintendo has made a 10:1 Split, so that all shareholders have seen their shares multiply by 10, and in the coming years we will see all the per-share figures divided by 10 (DPS, EPS…).

The reason for this split is mainly to make the company more liquid and make it easier for small shareholders to buy. This is because in Japan you can only buy shares in packs of 100. Until recently a Nintendo share costed about ¥55,000 (approx. $390), so a buyer of shares had to pay a minimum of $39,000 to buy Nintendo shares, something prohibitive for a small investor. Now they will be able to do so for a minimum amount of about $3,900, something more reasonable for middle class individuals.

As for the number of Nintendo shares, it has declined slightly in recent years: -8% since 2012. Although the company has permission from shareholders to issue shares up to almost triple the outstanding shares, it has never put it into practice. This past fiscal year the company has introduced a stock-based compensation plan for its executives, although the company also makes share buybacks irregularly when it sees fit.

We will see if in the future Nintendo manages to keep its number of shares constant or decreasing. For the time being, it seems that the company is also cautious in this regard.



Today we have seen a very particular company, which presents a cyclical behavior completely independent of macroeconomics: the success of its platforms. Given that video game platforms are practically an oligopoly of 3 companies (Nintendo, Sony and Microsoft), the company’s bonanza depends on when it manages to position itself in front of the other two companies, and these intervals of high net profits last as long as the trend of its video game consoles.

Given this intrinsic cyclicality of Nintendo’s business, the company is very cautious with its finances. It has a tremendously solid balance sheet, which allows to absorb years of poor success. And its substantial short-term investments (stocks, bonds…) provide a passive financial income.

The company’s profitability depends entirely on the success of its platforms, which is why we have seen Nintendo forge alliances with other companies to ensure that it remains constantly at the forefront of the industry, even at the cost of losing some profitability or causing the birth of a competitor, as happened with Sony and its Playstation.

Nintendo is also consistent with its Dividend payout policy, which is adjusted to around half of its Net Profit. However, this means that its dividend is also highly cyclical and depends entirely on the company’s performance from year to year.

In the future, Nintendo wants to smooth the volatility of its results by exploiting its most unique asset: the intellectual property. We will see if Nintendo can achieve a certain amount of recurring revenue through movies, theme parks and merchandising and online strategies. It also intends to do the same by digitizing its business and promoting subscription-based gaming systems.

Lastly, it is worth mentioning that if we invest in Nintendo we are very exposed to the yen as a currency. Not only does the company have an important part of its turnover in Japan, but its results are strongly impacted by the currency exchange rate. Moreover, even if we buy the stock in € on the German stock exchange, we can appreciate the currency effect even in the share price, which has fallen by 25% from its peak in 2021 in euros, while it has only fallen by 17% in its yen price.

In conclusion, we believe that at the moment Nintendo is not a good fit for our strategy, especially given the unpredictability of its Dividend. It may be a good investment if bought in times when Nintendo is not successful with its platforms, hoping that with its classic and perennial Intellectual Property the company will manage to rebound in the future by releasing a successful platform. For example, Nintendo was trading at ¥875 in 2012 when its Wii U was a fiasco. Bought at that time, we would have seen the share price increase 6-fold in less than 10 years and we would have a Dividend Yield of 23% this year. However, we believe that for a DGI portfolio Nintendo only makes sense if we are big fans of the brand, if we don’t mind being heavily exposed to the yen, and if we buy it at times when this century-old company is depressed.


What do you think about Nintendo? Do you have it in your portfolio? What do you think about the Japanese market? Do you think it is suitable for our DGI strategy? In which cases would you buy it?

If you would like more details on historical data or target prices, our Report is at your disposal.

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Best regards and see you in the next article!


Sources consulted:

Annual Reports (2011-2021)
Youtube: /watch?v=kleKetOBXC8&t=339s


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