Unmissable Chance for Earning Passive Income with This Specific Stock Investment
Broadcom, a leading semiconductor and software company, continues to impress investors with its steady dividend growth. The tech giant pays shareholders $16.40 per share annually, resulting in a return of 3.1%.
The company's dividend growth is supported by strong cash flow from its semiconductor and software businesses. Broadcom's quarterly dividend currently stands at $0.59 per share, a figure that has grown steadily over the years.
The acquisition of VMware, a prominent player in the AI and enterprise cloud space, is expected to further bolster Broadcom's dividend sustainability and growth. The merger is projected to add high-margin recurring software revenue to Broadcom's coffers, expanding its EBITDA by about $8.5 billion within three years post-merger.
The integration of VMware is set to diversify Broadcom's revenue streams and strengthen its position in the AI and enterprise cloud market. Management's guidance of rapid AI revenue growth (60% year-over-year jump to $5.1 billion in Q3 fiscal 2025) and the expanding AI ecosystem further underpin the outlook for steady dividend growth.
Broadcom's business segments include semiconductor solutions and infrastructure software. In Q2, the infrastructure software segment made up 23% of its revenue, a figure expected to increase to just over 45% after the proposed merger with VMWare.
The company's net income for the first two quarters of 2022 was $4.9 billion, a 81% increase compared to the same period in 2021. Broadcom's revenue for the first half of fiscal 2022 was $15.8 billion, a 19% increase compared to the first two quarters of 2021.
VMWare reported $6.6 billion in revenue in its last two quarters, a figure that is likely to contribute significantly to Broadcom's revenue post-merger.
Broadcom's dividend payout began with a quarterly dividend of $0.07 per share in December 2010. Since then, the company has seen substantial dividend hikes, with the growth rate exceeding that of tech companies like Texas Instruments and IBM.
The addition of VMWare is expected to derive considerable revenues from software for Broadcom. The company's dividend yield has increased due to the decline in the Nasdaq bear market, making Broadcom one of the more notable high-yield tech stocks.
Despite falling into bear market territory this year, Broadcom's P/E ratio is at 26, near three-year lows. This, coupled with Broadcom's free cash flow of over $7.5 billion in the first half of 2022, indicates a strong financial position.
It's worth noting that Broadcom's first shareholders who bought at a low of over $14 per share in 2009 have earned an annual return greater than their original investment in dividends alone. Since its IPO, Broadcom, then known as Avago Technologies, has seen a significant increase in its stock price.
Investors should, however, monitor debt levels and margin recovery as integration costs weigh on near-term profitability. Nonetheless, Broadcom's steady dividend growth, robust financials, and strategic acquisitions position it well for continued success in the tech industry.
Broadcom's strategic acquisitions, such as the incorporation of VMware, not only diversify its revenue streams but also expand its high-margin recurring software revenue, supporting a continued growth in its dividend payments. The company's ongoing growth in technology-driven sectors, like AI and enterprise cloud, is generating a considerable amount of money, contributing to its steady dividend payouts.
