Today, Investment U’s Income Expert, Marc Lichtenfeld, takes a look at Broadcom’s dividend safety.
Broadcom (Nasdaq: AVGO) sells a wide variety of technology products, including switches and routers, and software to manage cybersecurity and payment security.
Though the company reinvented itself recently with its acquisition of software company Symantec, Broadcom is a part of the old guard when it comes to Silicon Valley tech companies.
The company has been around for more than 50 years. So it’s no surprise that, while still innovative, it generates plenty of earnings and cash flow and pays a dividend as a result.
And it pays a nice dividend, particularly for a technology company. With a $3.25 per share quarterly payout, Broadcom’s yield comes out to 3.5%.
Can this high-tech giant continue to reward shareholders with $3.25 in cash per quarter?
Broadcom Dividend Safety Rating: Loads of Free Cash Flow
Free cash flow is rising even during this pandemic year and is projected to do so again in 2021.
Last year, while generating $9.3 billion in free cash flow, Broadcom paid shareholders $4.2 billion in dividends.
This year, free cash flow is forecast to rise to $10.9 billion while Broadcom pays out $5.3 billion in dividends.
That’s a payout ratio below 50%, which gives me a lot of confidence in the company’s ability to continue to pay dividends – even if free cash flow drops next year.
Fortunately, that shouldn’t be the case, as free cash flow is forecast to rise to $11.8 billion.
Broadcom has a solid dividend-paying history. It has raised its payout to shareholders every year for 10 years.
Broadcom’s free cash flow has steadily increased over the years and is expected to grow further, its payout ratio is low, and it has a track record of raising its dividend every year.
Mature tech companies are often secure dividend payers, and Broadcom is no different.
Dividend Safety Rating: A
The Broadcom dividend safety is as good as it can be right now. In fact, the free cash flow it has available puts this tech giant at almost no risk of being cut.
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About Marc Lichtenfeld
Marc Lichtenfeld is the Chief Income Strategist of Investment U’s publisher, The Oxford Club. He has more than three decades of experience in the market and a dedicated following of more than 500,000 investors.
After getting his start on the trading desk at Carlin Equities, he moved over to Avalon Research Group as a senior analyst. Over the years, Marc’s commentary has appeared in The Wall Street Journal, Barron’s and U.S. News & World Report, among other outlets. Prior to joining The Oxford Club, he was a senior columnist at Jim Cramer’s TheStreet. Today, he is a sought-after media guest who has appeared on CNBC, Fox Business and Yahoo Finance.
Marc shares his financial advice via The Oxford Club’s free daily e-letter called Wealthy Retirement and a monthly, income-focused newsletter called The Oxford Income Letter. He also runs four subscription-based trading services: Technical Pattern Profits, Penny Options Trader, Oxford Bond Advantage and Predictive Profits.
His first book, Get Rich with Dividends: A Proven System for Earning Double-Digit Returns, achieved bestseller status shortly after its release in 2012, and the second edition was named the 2018 Book of the Year by the Institute for Financial Literacy. It has been published in four languages. In early 2018, Marc released his second book, You Don’t Have to Drive an Uber in Retirement: How to Maintain Your Lifestyle without Getting a Job or Cutting Corners, which hit No. 1 on Amazon’s bestseller list. It was named the 2019 Book of the Year by the Institute for Financial Literacy.
