TLDR
- Broadcom Inc. (AVGO) ranks as the top dividend stock among hedge funds with 161 hedge fund holders
- The company reported $14.05 billion in Q4 2024 revenue, a 51% increase year-over-year
- AI-related revenue surged 220% to $12.2 billion, driven by AI XPUs and Ethernet networking solutions
- Broadcom has increased its dividend for 14 consecutive years, currently paying $0.59 quarterly with a 1.16% yield
- The company’s VMware acquisition has boosted operating margins to 70%, exceeding integration targets
Broadcom Inc. (NASDAQ:AVGO) has emerged as the top dividend stock among hedge funds, with 161 hedge fund holders backing the semiconductor giant. The company continues to show remarkable growth, particularly in its artificial intelligence segment.
In the fourth quarter of 2024, Broadcom reported revenue of $14.05 billion. This represents an impressive 51% increase compared to the same period last year.
The company’s semiconductor revenue reached a record $30.1 billion for the fiscal year. This achievement highlights Broadcom’s strong position in the market.
AI-related revenue has been particularly strong. It surged 220% year-over-year to $12.2 billion, driven by high demand for Broadcom’s advanced AI XPUs and Ethernet networking solutions.
For investors focused on dividends, Broadcom offers an attractive profile. The company has consistently increased its dividend payments for 14 consecutive years.
Currently, Broadcom pays a quarterly dividend of $0.59 per share. This gives the stock a dividend yield of 1.16% as of February 25, 2025.
Broadcom generated $5.6 billion in operating cash flow
The company’s strong cash flow supports these dividend payments. In the latest quarter, Broadcom generated $5.6 billion in operating cash flow.
Free cash flow reached $5.48 billion, representing 39% of the company’s total revenue. This healthy cash generation provides a solid foundation for future dividend growth.
Broadcom’s acquisition of VMware, a cloud virtualization firm, has further strengthened its market position. Since the acquisition a year ago, VMware’s operating margin has climbed to 70%.
The company is on track to exceed its target of generating more than $8.5 billion in adjusted EBITDA within three years of the VMware acquisition. This integration is ahead of schedule according to analysts.
For the full fiscal year, Broadcom’s adjusted EBITDA rose 37% year-over-year to a record $31.9 billion. These results demonstrate the company’s ability to drive profitability alongside revenue growth.
Broadcom plays a dominant role in networking, managing over 99% of internet traffic. This critical infrastructure position helps insulate the company from market fluctuations.
Some analysts point to Broadcom’s continued leadership in AI ASIC and networking chips. The company has secured 3nm AI ASIC chip deals with tech giants like Alphabet and Meta.
Kacher remains bullish on Broadcom
Glen Kacher of Lights Street Capital remains bullish on Broadcom as one of the top “AI 5” semiconductor companies. He cited the “massive investment cycle, over $200 billion a year of capital expenditures” driving growth in the AI sector.
Despite the positive outlook, some analysts suggest Broadcom’s growth rates may moderate to below 20% CAGR starting in the first quarter of 2025. This would be a notable decrease from the recent 50% growth rate.
The company also carries approximately $58 billion in net debt, which some investors consider relatively high. This debt load could become more burdensome if growth rates slow as predicted.
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