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Inside Broadcom’s Cash Flows and Balance Sheet Structure

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Sep. 11 2018, Updated 8:25 p.m. ET

Broadcom’s cash flows

Chipmaker Broadcom (AVGO) has strong cash flows and has been rewarding its shareholders with dividends and share buybacks. In the third quarter, its cash flow from operations was $2.25 billion compared to $2.31 billion in the second quarter and $1.66 billion in Q3 2017. Its capex was $120 million in the third quarter, which was lower than $189 million in the second quarter and $255 million in Q3 2017. Capex for the fourth fiscal quarter is expected to be $110 million.

The company had a cash balance of $4.14 billion at the end of the third quarter compared to $8.19 billion at the end of the second quarter.

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Share buybacks

According to the company’s capital allocation policy, management returns 50% of the prior fiscal year’s free cash flow to stockholders in the form of cash dividends. The rest is used for share repurchases and future acquisitions. The company ended the quarter with a free cash flow of $2.13 billion.

In the third quarter, it repurchased ~24 million shares for ~$5.38 billion. At the end of the second quarter, its share repurchase authorization was worth $6.3 billion on a $12 billion buyback authorization announced in April.

In July, Broadcom entered into an agreement to acquire enterprise software firm CA Technologies (CA). Broadcom is ready to pay $18.9 billion, or $44.50 per share, in cash for the acquisition. However, regulatory approval is still pending.

Dividend payments

Broadcom announced a cash dividend of $1.75 per share in June, which will be paid on September 28 to shareholders of record as of September 19.

The annualized dividend of $7 per share represents a dividend payout of 40% and a yield of 3.01% as of September 7. In comparison, Broadcom’s peers Nvidia (NVDA), Intel (INTC), and Qualcomm (QCOM) have dividend yields of 0.22%, 2.58%, and 3.52%, respectively, as of September 7.

Correction: An earlier version of the chart in this article misrepresented Nvidia’s dividend yield.

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