3. Broadcom Inc. (NASDAQ:AVGO)
AQR Capital’s Stake Value: $483,336,114
Dividend Yield as of August 22: 1.24%
Broadcom Inc. (NASDAQ:AVGO) is a California-based multinational semiconductor company that offers a wide range of semiconductor and infrastructure software products. The company offers network and data center solutions, along with cloud-based tools, through its subsidiary, VMware. Although about 60% of the company’s revenue comes from semiconductor solutions, its infrastructure software segment is also experiencing significant growth. The company offers a compelling opportunity at the crossroads of AI and semiconductors. Over the past year, the stock has risen by nearly 90%, prompting management to implement a 10-for-1 stock split in July to make Broadcom shares more accessible to investors and employees.
Baron Funds highlighted the company’s AI segment in its Q2 2024 investor letter. Here is what the firm has to say about Broadcom Inc. (NASDAQ:AVGO):
“Broadcom Inc. (NASDAQ:AVGO) is a global technology leader that designs, develops, and supplies a broad range of semiconductor and infrastructure software solutions. The stock rose during the quarter as it reported strong earnings on the back of its two key growth drivers, AI semiconductors and its acquired VMware software business. The company once again increased its outlook for AI-related revenue, now expecting $11 billion or more this year (versus prior guidance for $10 billion), on the back of strength in both hyperscale custom compute and networking chips, where Broadcom maintains dominating share. In networking, Broadcom’s solutions are critical to enabling AI training factories to scale towards 100,000 chip clusters in the near term and 1 million chip clusters over the coming years. In AI custom compute, Broadcom designs custom accelerators for large consumer- internet AI companies (such as Google and Meta), who are building increasingly large AI clusters to drive improvements in user engagement and targeted advertising on their consumer media platforms. VMware remains on track to continue rapid sequential growth while simultaneously reducing operating expenses, driving faster-than-expected margin expansion and accretion, as management has simplified the product offering and is converting customers from a license model to subscriptions. We believe VMware will grow beyond the $4 billion near-term quarterly target, well above current analyst expectations. These two factors combined have caused a re-rating to the growth profile for the overall company. To quote CEO Hock Tan, “there is only one Broadcom. Period.”
When we evaluate Broadcom Inc. (NASDAQ:AVGO) from a dividend perspective, it becomes clear that its strong cash generation sets it apart from its competitors, particularly within the tech industry. In the second quarter of 2024, the company generated over $4.5 billion in operating cash flow and its free cash flow for the period came in at over $4.4 billion. The free cash flow represented 36% of the company’s revenue. During the quarter, it also distributed $2.5 billion worth of dividends among shareholders, which makes it one of the best dividend-paying stocks on our list.
Though many tech companies offer dividends, only a few consistently deliver substantial returns to shareholders. Broadcom Inc. (NASDAQ:AVGO) is notable for its strong dividend history. Since initiating dividends in 2011, the company has increased its payouts annually. Over the years, its annual dividend has risen from $0.36 per share to $21.00 per share. Its quarterly dividend comes in at $5.25 per share for a dividend yield of 1.24%, as of August 22.
Broadcom Inc. (NASDAQ:AVGO) was a popular buy among elite funds during the second quarter of 2024 as the hedge fund positions in the company jumped to 130, from 115 in the previous quarter. The stakes owned by these hedge funds are valued at over $20 billion in total. Among these hedge funds, GQG Partners was the company’s leading stakeholder in Q2.
