Should Dividend Investors Ride the Broadcom Inc Tailwind?

Broadcom Inc AVGO, one of the large-cap tech stocks benefiting from the AI boom, has recently released impressive second fiscal quarter earnings. The company reported revenues of $12.49 billion, beating analyst estimates of $12.03 billion, and earnings per share (EPS) of $10.96, surpassing the analyst consensus estimate of $10.84.

The stock has rallied strongly since the start of the AI boom, gaining 200% since January 2023 and 50% year to date. Broadcom Inc’s market cap has also swelled to $804.05 billion, making it the world’s 11th largest company. While analysts recommend Broadcom Inc as a top AI growth stock, dividend investors may wonder if it’s a good income stock.

When determining the quality of a dividend stock, payment history is a key factor. Top income stocks have a long history of paying consistent and increasing dividends. Broadcom Inc is a dividend achiever with 11 years of consistent and rising quarterly dividends.

The stock has maintained a compound annual growth rate (CAGR) of 12.87% over the last three years, 17.49% over the last five years and 35.28% over the last decade. Broadcom Inc currently pays a dividend yield of 1.21%, which is higher than the industry average yield of 1.025% but lower than the S&P 500 long-term average of 1.85%.

While the company’s payout ratio of 53% and strong balance sheet prove dividend sustainability, its low dividend yield may make it less attractive for income-focused investors. Broadcom Inc could be a good bet for those seeking capital gains, but it may not be the best choice for investors who rely on dividend income.

Income investors should generally pursue stable companies with a track record of superior dividend payments and yields above 5%. However, for those interested in dividend growth investing, Broadcom Inc’s consistent and rising dividends could make it a solid choice for long-term portfolio growth.

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