Broadcom Stock Analysis: Riding the Wave of AI and Dividend Growth
Dividend Hero keeps impressing with market value surpassing $1 trillion
Dividend Hero Broadcom (AVGO) has been making headlines recently, with its stock crossing the $1 trillion market cap milestone. Known for its strong track record, Broadcom has long been a favorite among investors, but its recent surge raises a critical question: Is it still a good buy, or is it too risky at these levels? Let’s unpack the latest developments and what they mean for the future of this tech giant.
A Record-Setting Year
Broadcom’s stock has soared over 101% year-to-date (YTD), driven by a combination of robust earnings and a growing role in the AI semiconductor market. In its latest earnings report, Broadcom announced an 11% dividend hike, contributing to a stock price surge of 24.4% in just a few days. The company’s market cap now sits at a staggering $1.05 trillion, with an annual dividend payout of $11 billion supported by strong free cash flow.
Despite slightly missing revenue estimates, Broadcom beat earnings per share (EPS) expectations by 2.9%. So, what’s fueling investor enthusiasm? The answer lies in the company’s AI semiconductor business, a growing segment that promises significant long-term revenue opportunities. Additionally, Broadcom extended its streak of double-digit dividend hikes, continuing a pattern established since it began paying dividends in 2010.
Dividend Growth: A Standout Story
Broadcom’s consistent dividend growth is one of its most attractive features. Over the past decade, the company has increased its dividend by an astounding 1,585%, with a 10-year annual growth rate of 32.6%. Even with the stock’s meteoric rise, Broadcom’s dividend yield remains over 1%, making it a compelling option for dividend growth investors.
Broadcom’s free cash flow—a key driver of its dividend hikes—has been impressive. The company generated $19.4 billion in free cash flow in 2024, a figure expected to rise to $28.5 billion in 2025. By 2027, analysts project free cash flow per share to exceed $9.00, leaving plenty of room for continued dividend growth, debt reduction, and other shareholder rewards.
The AI Boom and Semiconductor Growth
AI is the cornerstone of Broadcom’s recent success. The company forecasts that by 2027, its AI semiconductor market could reach a value of $60 billion to $90 billion in annual revenue. Broadcom has positioned itself as a critical supplier for major tech companies seeking alternatives to Nvidia’s expensive and supply-constrained AI processors and could grab more than 50% of that market. Some analysts even forecast a 70% share exceeding $50 billion in AI-related revenue within a few years for Broadcom.