Broadcom (NASDAQ:AVGO) Will Pay A Larger Dividend Than Last Year At $4.60

Broadcom Inc.'s (NASDAQ:AVGO) dividend will be increasing from last year's payment of the same period to $4.60 on 30th of December. This makes the dividend yield 3.3%, which is above the industry average.

View our latest analysis for Broadcom

Broadcom's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Broadcom was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 36.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which is in the range that makes us comfortable with the sustainability of the dividend.

Broadcom Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.52 in 2012, and the most recent fiscal year payment was $18.40. This implies that the company grew its distributions at a yearly rate of about 43% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Broadcom has seen EPS rising for the last five years, at 46% per annum. Broadcom is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Broadcom Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Broadcom that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.