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Broadcom Stock ($AVGO) Analysis

Updated: Apr 14

Broadcom Logo

Broadcom Inc. (NASDAQ: AVGO) is large manufacturer of semiconductors and infrastructure software products. Broadcom posted an impressive FY22 revenue of $33.2B, owns more that 17,000 patents, spent $4.9B in 2022 on research and development. $AVGO continues to be a leader in their field and presents a great opportunity for dividend income investors.

From Broadcom's Website:

Broadcom Inc., a Delaware corporation headquartered in San Jose, California, is a global infrastructure technology leader built on 50 years of innovation, collaboration and engineering excellence.

With roots based in the rich technical heritage of AT&T/Bell Labs, Lucent and Hewlett-Packard/Agilent, Broadcom focuses on technologies that connect our world. Through the combination of industry leaders Broadcom, LSI, Broadcom Corporation, Brocade, CA Technologies and Symantec, the company has the size, scope and engineering talent to lead the industry into the future.

Just a few highlighted stats from Broadcom's 2022 performance:

Broadcom FY22 Revenue
Broadcom FY22 patents
Broadcom FY22 R&D investment

Table of Contents

Broadcom Stock Price

Broadcom Dividend

Broadcom Dividend History

Broadcom Stock Forecast

Broadcom VMware Acquisition

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Broadcom Stock Price

Broadcom FY22 Financial Numbers
Broadcom FY22 Revenue by Segment

AVGO's stock price total return is 157% over the last five years or an average of 31.4% annually. Posting an impressive $33B in revenue in 2022, AVGO has grown its' revenue by 13%~ (CAGR) since 2018. Broadcom's earnings have helped it's net income recover post COVID, which sits around $11.4B with a 5Y CAGR of 46%. Lastly, $AVGO Free Cash Flow has increased 24% over the last five years and sits at $16.3B for Q3 2022. These values all point to the strong stability of AVGO's dividend and dividend growth rate.

Broadcom Total Return

Broadcom ($AVGO) Dividend

The AVGO dividend currently sits at $4.60 a quarter or $18.40 annually. This makes Broadcom's dividend yield of 3.12% as of January 6th 2023. This is on par with AVGO's ten year average dividend yield of 3.08%, indicating that AVGO might be priced in line with historical values right now.

AVGO Dividend History

Broadcom Dividend CAGR

Broadcom has increased and sustained their dividend for 13 years and its' dividend has grown 38% since FY16 but has dropped to 13% CAGR over the last three years, which is still impressive. This translates to roughly 5.22% Yield on Cost over the last five years. AVGO's dividend payout ratio continues to drop post COVID into highly sustainable territory. It currently sits at 60% which is well below my normal safety margin of 75% or less. This should continue to fall into 2023.

Broadcom Dividend Payout Ratio

AVGO Stock Forecast

CNN Money shows Broadcom with 15 BUY ratings, 3 HOLD ratings, and 0 SELL ratings as of January 2023. The median AVGO price target is $675, representing a 14.7% increase. The high price target sits at $775 or a 31% increase! Wallstreetzen has AVGO listed as a STRONG BUY for 2023. Lastly, MarketBeat has AVGO listed as a Moderate Buy with a price target of $669. Internal trading numbers are also low, possibly indicating an expected increase in price in the months or years to come.

My analysis indicated that AVGO is poised for continued growth in 2023. If the market continues to recover, I expect AVGO to grow 10%-20% in 2023. My personal AVGO stock forecast is $680-$700 by the end of the year. I rank AVGO as a BUY/GROW meaning I recommend adding it to your portfolio (BUY) or adding to your current position (GROW). I currently don't hold AVGO in my portfolio. I plan to DCA into a position around 2% of overall portfolio starting this month. I will lower my DGRO ETF allocation by 2% to make room for AVGO.

Broadcom VMware Acquisition

Broadcom VMware acquisition

Finalized mid-year 2022, this Broadcom acquisition has been approved by VMware and Broadcom shareholders. Following the closing of the transaction, the Broadcom Software Group will be rebranded and operate as VMware, incorporating Broadcom's existing infrastructure and security software solutions as part of an expanded VMware portfolio. The merger is under fire and investigation by European Commission and the US SEC. Broadcom has stated that they are confident that they can move forward with the deal. As the situation develops we'll need to monitor the situation as it moves forward to see how it might affect AVGO's stock price in 2023.

Broadcom VMware acquisition fact sheet
Broadcom VMware Acquisition Fact Sheet

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