Is Broadcom Inc. (AVGO) the Most Reliable Dividend Stock to Buy According to Hedge Funds?

Broadcom Inc. (AVGO) has long been a favorite among hedge funds, with 130 portfolios holding the stock at the end of the second quarter, up from 115 in the previous quarter. The company's strong financial performance, consistent dividend history, and attractive valuation make it an appealing choice for income-oriented investors. In this article, we will explore the reasons why Broadcom Inc. (AVGO) is considered a reliable dividend stock by hedge funds and discuss its dividend history, growth, and stability.



Dividend History and Growth

Broadcom Inc. (AVGO) has a consistent dividend history, with an annual dividend of $2.36 per share, yielding 1.05%. The company pays dividends every three months, with the last ex-dividend date being Dec 23, 2024. The previous Broadcom Inc. dividend was 53c and it went ex 27 days ago and was paid 16 days ago. There are typically 4 dividends per year (excluding specials), and the dividend cover is approximately 7.2. This strong dividend history and growth make Broadcom Inc. (AVGO) an attractive choice for investors seeking income and capital appreciation.

Dividend Stability

Broadcom's dividend stability is supported by its strong financial performance and diverse product offerings. The company's semiconductor solutions segment designs and develops various semiconductor devices, including complex digital and mixed-signal complementary metal oxide semiconductor (CMOS) based devices and analog III-V based products. These products are used in various applications, such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. This diverse range of products and applications contributes to the company's revenue stability, which in turn supports its dividend payments.

Additionally, Broadcom's infrastructure software segment provides enterprise software assets, such as VMware, Symantec, and CA Technologies. These assets can provide defensiveness if enterprise IT spending continues to be muted, as mentioned in the Parnassus Value Equity Fund's Q2 2024 investor letter. The strength of these software assets can help maintain Broadcom's earnings and cash flow, which are essential for sustaining its dividend payments.



Attractive Valuation

Despite its strong financial performance and dividend history, Broadcom's stock price may be undervalued, presenting an opportunity for hedge funds to invest in the company at a relatively low price-to-earnings ratio (P/E) of 174.13077. This attractive valuation, combined with the company's strong dividend history and growth, makes Broadcom Inc. (AVGO) an appealing choice for income-oriented investors.

Conclusion

Broadcom Inc. (AVGO) is considered a reliable dividend stock by hedge funds due to its strong financial performance, consistent dividend history, attractive valuation, and diverse product offerings. The company's semiconductor and infrastructure software businesses contribute to the stability of its dividend, making it an attractive choice for investors seeking income and capital appreciation. With a dividend yield of 1.05% and a dividend cover of approximately 7.2, Broadcom Inc. (AVGO) offers a compelling combination of income and growth potential. As the company continues to invest in AI-related technologies and benefit from the growing demand for AI infrastructure, its dividend growth and stability are likely to remain strong.