Broadcom Inc. (NASDAQ: AVGO) will soon trade ex-dividend, with an ex-dividend date of June 24. Investors who buy shares before this date will be eligible for the next dividend payment of $5.25 per share on June 28. The company has a residual yield of 1.2% based on past dividends.
Dividends are crucial for long-term investors, but sustainability is key. Broadcom’s dividend payout ratio is 87%, indicating that it is paying out a significant portion of its earnings as dividends. However, the dividend is well-covered by both profits and cash flow, with only 47% of free cash flow being used to pay dividends.
Earnings per share for Broadcom have declined by 5.7% annually over the past five years, raising concerns about the future sustainability of the dividend. Despite a historical dividend growth rate of 32% annually, without earnings growth, it is unlikely that the dividend will increase in the future.
While Broadcom’s current payout ratio suggests the dividend is sustainable for now, declining earnings and limited growth prospects raise some red flags. Investors should carefully consider the risks associated with Broadcom before making investment decisions. It is important to conduct a thorough analysis of the company’s financial health, risks, and fair value estimates before investing.
In conclusion, while Broadcom’s dividend payout is currently sustainable, there are concerns about the company’s declining earnings and limited growth prospects. Investors should weigh these factors carefully before investing in the company. It is recommended to conduct a detailed analysis of Broadcom’s financial health and valuation before making any investment decisions.
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