With provide constraints and myriad different points, semiconductor shares have had a tough go of it in 2022.
However lots of the corporations nonetheless generate gobs of money move, which ought to proceed within the foreseeable future.
Broadcom (Nasdaq: AVGO) supplies semiconductors, fiber optics and software program to all kinds of industries. The San Jose, California-based firm pays a 3.2% dividend yield. However with the latest struggles within the trade, can Broadcom shareholders depend on the dividend?
Broadcom’s free money move progress is spectacular, and that’s anticipated to proceed as free money move is forecast to rise 26% this yr and one other 7% subsequent yr.
In the meantime, the tech large is projected to pay out simply $6.6 billion in dividends this yr and $7.5 billion subsequent yr, for very snug payout ratios of simply 39% and 41%, respectively.
Broadcom at present pays a quarterly dividend of $4.10 per share, which comes out to a 3.2% yield. It has raised its dividend yearly since 2011.
Contemplating Broadcom is rising its free money move, has a low payout ratio and has an admirable dividend-raising monitor report, the dividend is kind of secure.
Dividend Security Score: A
I used to be not too long ago requested how secure an organization’s bonds are in contrast with its dividend funds. A bond fee has precedence over a dividend. So an organization will all the time be sure its bond funds are lined earlier than declaring a dividend.
If an organization is making any dividend funds – even when it minimize the dividend – meaning its bonds are in fine condition. In any other case, the corporate would preserve money and eradicate the dividend if it wanted to pay bond curiosity. When an organization’s dividend is secure – like in Broadcom’s case – then you recognize that its bonds are rock-solid.
Good investing,
Marc
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