Ever since shares of Broadcom (NASDAQ:AVGO) bottomed in November at around $211.50, the stock continued on an uptrend and will likely close out at new 52-week highs in the weeks ahead. Its fourth-quarter earnings report reignited bulls. Strength in wireless will bring in more than enough cash flow to fund debt. Plus, the buyout of CA, which gives Broadcom exposure to the software space, will add to profits in the years ahead.
In Q4, Broadcom reported non-GAAP of $5.85 as revenue rose 12.4% to $5.44 billion. Management strengthened investor confidence on cash flow by raising the dividend by 51.4%. The stock now yields 4.18%, an incredible yield for a tech stock.
If the 22 analysts are to be believed, AVGO stock’s upside of around 14% (price target of $291) further justifies continuing to own this stock in 2019. Those who do not hold it yet may want to wait for a better entry point first.
Broadcom’s peers do not offer the same dividend yield safety: Qualcomm (NASDAQ:QCOM) peaked at over $75 and is now in the mid-$50s. The stock now yields ~4.4% but investors would have lost over 20% in the quarter. Skyworks (NASDAQ:SWKS), whose dividend yield is 2.25%, relies too much on Apple (NASDAQ:AAPL). NXP Semiconductors (NASDAQ:NXPI) has an even worse dividend yield but its growth in automotive may justify holding the stock.
Disclosure: author owns shares of NXPI.
