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Inside Broadcom’s Cash Flows and Balance Sheet Structure

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Dec. 12 2018, Updated 7:31 a.m. ET

Broadcom’s cash flows

Chip maker Broadcom (AVGO) has strong cash flows and has been rewarding its shareholders with dividends and share buybacks.

In the fourth quarter of fiscal 2018, the company’s cash flow from operations was $2.64 billion compared to $2.25 billion in the previous quarter and $1.96 billion in the previous year’s quarter. Its capex was $106 million in the reported quarter, lower than $120 million in the third quarter of fiscal 2018 and $233 million in the fourth quarter of fiscal 2017. Its capex for fiscal 2019 is expected to be ~$550 million.

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Share buybacks

Broadcom generally returns 50% of the previous fiscal year’s free cash flow to stockholders in the form of cash dividends. The remaining balance of its free cash flow is intended to be used for share repurchases and future acquisitions. The company ended the quarter with free cash flow of $2.53 billion.

During the fourth quarter, the company repurchased nearly 24 million shares for ~$5.38 billion. In fiscal 2018, the company repurchased $7.26 billion worth of shares, and it has plans for buybacks worth $8 billion in fiscal 2019. At the end of the fourth quarter, the company was left with a share repurchase authorization of $6.3 billion out of the $12 billion buyback authorization it announced in April.

Dividend payments

During the quarter, Broadcom announced a 51% hike in quarterly cash dividends. The company will now pay a cash dividend of $2.65 per share, higher than its previous payout of $1.75 per share. The new dividend will be payable to stockholders of record as of December 19 on December 28. The company plans to spend $4 billion on dividends.

The company’s annualized dividend of $10.60 per share represents a dividend payout of 58.6% and a yield of 4.64% as of December 7. In comparison, Broadcom’s peers NVIDIA (NVDA), Intel (INTC), and Qualcomm (QCOM) have dividend yields of 0.43%, 2.60%, and 4.43%, respectively, as of December 7.

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