Broadcom Inc. (NASDAQ:AVGO) is set to go ex-dividend in the next three days, meaning investors must own the stock by June 24 to receive the upcoming dividend of $5.25 per share. The company has a residual yield of 1.2% based on its current share price of $1,802.52. Dividends are important for long-term investors, but it’s crucial to ensure that the company can sustain these payments. Broadcom’s dividend payout ratio is 87% of earnings, indicating that the company pays out most of its earnings to shareholders. However, the dividend is covered by both profits and cash flow, providing a level of sustainability.
Despite declining earnings per share over the past five years, Broadcom has historically increased its dividend by an average of 32% annually over the last nine years. This raises concerns about the future growth of the dividend, as without earnings growth, sustaining higher dividend payments becomes challenging. While the current payout ratio is reasonable, investors should be cautious about the company’s ability to continue increasing dividends without earnings growth.
In conclusion, while Broadcom’s dividend payout appears sustainable for now, there are concerns about the company’s ability to grow dividends in the future. Investors should consider other dividend stocks with more attractive prospects. Understanding the risks involved with Broadcom is crucial for potential investors.
If you’re looking for more in-depth analysis on Broadcom and its valuation, risks, dividends, insider transactions, and financial health, you can access a full analysis on Simply Wall St. It’s important to conduct thorough research before investing in any stock to make informed decisions based on your financial goals and risk tolerance.
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