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Broadcom Continues to Spend on Buybacks and Dividends

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Mar. 19 2019, Published 8:34 a.m. ET

Broadcom’s free cash flow

Chip maker Broadcom (AVGO) has strong free cash flow and remains committed to rewarding its shareholders with cash dividends and share buybacks. In the first quarter of fiscal 2019, the company’s cash flow from operations was $2.13 billion compared to $2.64 billion in the previous quarter and $1.69 billion in the previous year’s quarter. Its capex was $99 million in the reported quarter, lower than $106 million in the previous quarter.

Broadcom’s capex for fiscal 2019 is expected to be ~$550 million, and its free cash flow is expected to be $10 billion.

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Share buybacks

According to the company’s capital allocation policy, management returns 50% of its free cash flow to stockholders in the form of cash dividends. The remaining balance of its free cash flow is intended to be utilized for share repurchases and future acquisitions. The company ended the quarter with free cash flow of over $2 billion, 39% higher than the previous year’s period.

During the first quarter, the company repurchased 13.9 million shares for ~$3.4 billion. Apart from buybacks, the company returned $1.1 billion in cash dividends and bought back $14.2 million worth of AVGO shares from its shareholders. In fiscal 2018, the company repurchased $7.26 billion worth of shares, and it remains committed to buying back $8 billion worth in fiscal 2019.

Broadcom plans to maintain its current dividend of $2.65 per share in fiscal 2019, which means that the company will spend over $4 billion on dividends.

Dividend yield

At an annualized dividend per share of $10.60, Broadcom’s dividend payout is 58.6%, and its yield is 3.61% as of March 18. In comparison, Broadcom’s semiconductor rivals NVIDIA (NVDA), Intel (INTC), and Qualcomm (QCOM) have dividend yields of 0.38%, 2.33%, and 4.36%, respectively, as of March 18.

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