Happy Monday!

We have a great week of investing in front of us!

Today, I give an updated stock analysis on Broadcom, ticker symbol AVGO. This is one of the best dividend growth stocks. However, it may have become overvalued…

On top of this, I share some of the best dividend increases from the week.

Let’s do this!

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THE KEY STORY

Is Broadcom Stock Overvalued? | AVGO Stock Analysis 2024

Today, we delve into the fascinating journey of Broadcom (AVGO), a company that's making significant waves in the tech industry. From impressive stock performance to strategic acquisitions, Broadcom continues to be a favorite among dividend growth investors. Here’s a detailed look at the latest updates and what they mean for your investment strategy.

📊 Broadcom's Performance Snapshot

Recent Stock Performance:

Broadcom has been on an upward trajectory, with its stock price soaring from the mid-$500s to $1,700 per share over the past year and a half. The company's latest earnings report was well-received by Wall Street, resulting in an additional 12% stock price jump the following day.

Dividend Growth:

One of Broadcom's standout features is its robust dividend growth. Over the past decade, the company has achieved a compound annual growth rate of 34.55%. However, this growth rate has recently slowed to around 14%, which is still impressive but indicative of a maturing business.

💰 Financial Highlights and Earnings

Q2 2024 Quarterly Results:

• Revenue: $12.4 billion, a 43% increase year-over-year, entirely due to the VMware acquisition. Not organic growth.

• Earnings: Non-GAAP earnings per share of $10.96. Only 5.8% growth year over year.

• Free Cash Flow: $4.44 billion. Only 1.55% growth year over year.

Stock Split: Broadcom announced a 10-for-1 stock split, making its shares more accessible to a broader range of investors.

🏢 Strategic Acquisitions and Business Model

The Growth Model: Broadcom comes from a private equity background and they aim to drive growth through strategic acquisitions. The company's recent acquisition of VMware has diversified its operations, balancing its portfolio between software and semiconductor businesses.

Debt Management: Broadcom's growth strategy heavily relies on acquisitions funded by debt. The company has a track record of paying down this debt over time, maintaining strong cash flows to support dividends and future acquisitions.

🔍 Business Segments Breakdown

Semiconductor Business: Broadcom's semiconductor segment accounted for $7.2 billion in Q2 revenue. That is 58% of Broadcom’s total revenue. This is only 6% growth year over year. Despite the high growth in their AI segment it is currently a small portion of their overall business. The AI business is seeing rapid growth. The segment is projected to account for 35% of their semiconductor revenue in 2024, up from under 5% in 2019.

Software Business: Broadcom’s software business accounted for $5.28 billion in Q2 revenue. That is 42% of total revenue. All growth is contributed to the VMware acquisition. This has substantially boosted Broadcom's software revenue, enhancing its enterprise software offerings.

🌐 Market Position and Future Outlook

AI Market Impact: Broadcom's AI-related products are in high demand, but the long-term sustainability of this demand remains uncertain. Compared to Nvidia, Broadcom's growth in AI is NOT nearly as significant.

Valuation Concerns: With a market valuation exceeding $778 billion, some analysts are cautious about Broadcom's long-term prospects.

🏦 Portfolio Update

Investment Shift: I have decided to sell my Broadcom stock at a 200% gain in just under 1.5 years. That money has been allocated towards Visa stock. This decision was driven by concerns over Broadcom's high valuation and a preference for Visa's robust long-term growth potential. Watch the video linked above for a full explanation.

-Zach

NOTABLE DIVIDEND INCREASES

Casey’s General Stores, FedEx, Target, Caterpillar, Realty Income, etc

• $CASY — Casey’s General Stores declares $0.50/share quarterly dividend, 16.3% increase from prior dividend of $0.43.

• $FDX — FedEx declared $1.38/share quarterly dividend, a 9.5% increase from the prior dividend of $1.26.

• $TGT — Target declared $1.12/share quarterly dividend, a 1.8% increase from the prior dividend of $1.10.

• $CAT — Caterpillar declares a $1.41/share quarterly dividend, a 8.5% increase from the prior dividend of $1.30.

• $O — Realty Income declares $0.263/share monthly dividend, 0.2% increase from prior dividend of $0.2625.

• $WSM — William-Sonoma declares a $1.14/share quarterly dividend, a 0.9% increase from prior dividend of $1.13

Source: Dividend Data

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SOMETHING FUN

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— Zach

Disclaimer: Dividend Dividend Weekly (Dividend Data) is not a professional financial service. All materials released from Dividend Data Weekly (Dividend Data) are for educational and entertainment purposes. Dividend Data Weekly (Dividend Data) is not a replacement for a professional's opinion. Contributors to the Dividend Data Weekly (Dividend Data) might have equities mentioned in the newsletter