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Shares of technology heavyweight Broadcom (NYSE: AVGO) have gained momentum after the company reported its Q4 results of fiscal 2021. At the time of writing, Broadcom stock is up over 6% in pre-market trading on December 10.
AVGO stock went public back in August 2009 and has since returned a staggering 4,550% to investors in dividend-adjusted gains. Comparatively, the S&P 500 and the Technology Select Sector SPDR Fund (AMEX: XLK) have returned 489% and 936% respectively in this period. Let’s see how Broadcom performed in fiscal Q4 and if the company remains a top bet for long-term investors.
Broadcom reports revenue of $7.41 billion
In the fiscal Q4 of 2021, which ended in October, Broadcom reported revenue of $7.41 billion and earnings per share of $7.81. Wall Street forecast revenue of $7.36 billion and adjusted earnings of $7.74 per share in Q4. While sales were up 15% year over year, net income surged by almost 25% in Q4.
Broadcom reported an operating cash flow of $3.54 billion while its adjusted EBITDA and free cash flow stood at $4.54 billion and $3.45 billion respectively. The company ended fiscal 2021 with an adjusted EBITDA margin of 60% and $13.3 billion of free cash flow which was 49% of revenue.
This allowed Broadcom to increase its quarterly dividend by 14% to $4.10 per share as well as announce a share repurchase program of $10 billion.
Company CEO, Kirsten Spears stated, “In fiscal 2021, we achieved record adjusted EBITDA margin of 60%, generating $13.3 billion of free cash flow, or 49% of revenue. Consistent with our commitment to return excess cash to shareholders, we are increasing our target quarterly common stock dividend by 14 percent to $4.10 per share per quarter for fiscal year 2022, and announcing a new $10 billion share repurchase program.”
Broadcom forecast fiscal Q1 of 2022 sales of $7.6 billion which was higher than consensus estimates of $7.25 billion.
What next for AVGO stock investors?
Broadcom remains a top bet for growth and income-seeking investors. It has a wide portfolio of products and solutions that are used across industries. The semiconductor heavyweight still spends around $5 billion in research and development to ensure its product development pipeline is robust.
While Broadcom is part of several expanding addressable markets, it has grown top-line by several acquisitions that include CA Technologies and the enterprise security business of Symantec.
In fiscal 2021, its:
- Operating cash flow rose by $1.70 billion to $13.76 billion
- Adjusted EBITDA rose by $2.92 billion to $16.57 billion
- Free cash flow rose by $1.72 billion to $13.3 billion
Its solid expansion of cash flows and profit margins has allowed Broadcom to increase dividends at a stellar pace over the years. Right now, its annual dividend payouts stand at $16.4 per share, indicating a forward yield of 2.6% which is more than twice the yield of the S&P 500 that stands at 1.3%.
Broadcom’s quarterly dividends stood at just $0.07 per share in 2010. In the last 11 years, its dividends have increased at an annual rate of 39%, making it a top dividend growth stock to place your bets on.
The key takeaway
Valued at a market cap of $240 billion, Broadcom is forecast to increase sales by 7.6% to $29.54 billion in fiscal 2022 and by 4.6% to $30.91 billion in fiscal 2023. Its adjusted earnings per share are expected to increase from $28 in fiscal 2021 to $33.1 in fiscal 2022.
AVGO stock is trading at a forward price to sales multiple of 8.1x and a price to earnings multiple of 20x which is quite reasonable. Broadcom should be part of your long-term equity portfolio given its expanding profit margins, strong revenue growth, low payout ratio, and reasonable valuation.
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