Dividendology 对 $AVGO 的判断变化

And the first stock is a stock I've held in my portfolio for a few years now, and it's been a massive winner, and that's Broadcom. If we jump over to the political tab, one of the things we can see is there was some massive buying of Broadcom in Q2 of 2024 and Q2 of 2025. And while that buying has certainly slowed down, we can see over the last couple of quarters, there's been significantly more buying than selling.

Now, as you already know, if we look at this stock over the last 5 years, it's up by about 650%. 650%. And what's interesting about this is during the entirety of that runup, it's been growing its dividends at a high rate as well. It grows dividends at a double-digit rate. So, this is a true dividend growth stock.

Now, ultimately, growing free cash flow is the driver of intrinsic value, and free cash flow has exploded particularly in the last couple of years.

But here's where a lot of people have a concern. It's if we overlay the PE multiple for this stock. We can see the price to earnings multiple has climbed substantially and has been sitting in the 60s to 70 range over the last couple of years. That's quite concerning for a lot of investors, especially with the Trunk 12-month PE multiple right at 60.

But I'm here to make the case today that Broadcom at these prices is not ridiculous. From 2024 to 2025, we saw 38% growth in operating cash flows. It then jumped to 66%. So, we're talking about explosive growth.

How have they been able to grow at such a high rate? Well, it's certainly due to a multitude of factors, but historically speaking, Broadcom has been heavily driven by growth through acquisitions. For example, VMware, that acquisition was just back in 2023, and this was their largest acquisition valued at approximately 69 billion. Keep that number in mind, 69 billion. Again, for reference, operating cash flows in 2025 was just 27.5 billion. So, we're talking about a significant acquisition, eating up all of their operating cash flows for years to come.

But this was a very important acquisition. It transformed the company by adding one of the world's largest enterprise virtualization and private cloud platforms, which pushes us to have a broader conversation around the overall business model for this company.

What are the business segments? Well, take a look at fiscal year 2025 revenue. Really, there's two primary segments for Broadcom. We have infrastructure software and semiconductor solutions. Now, yes, we can point out these two different business segments, but what really makes this company so special is how well they complement each other.

On the semiconductor side, Broadcom designs highly specialized chips and connectivity products used in AI data center. So, yes, it's an AI stock and this is used in industrial equipment.

The company does not manufacture most of these chips itself. But what they do is they focus on the most valuable part of the process which is designing the chips and owning the intellectual property while outsourcing manufacturing to companies such as Taiwan Semiconductor.

So it's a much more capital-like business model which allows them to produce very high margins and enormous free cash flow without spending tens of billions of dollars like a lot of these other semiconductor companies.

So now Broadcom is working with companies like Google, Meta, Open AAI, Anthropic. These are companies looking to reduce their dependence on Nvidia, which is a huge advantage for Broadcom.

They're positioned to help them develop more efficient and less expensive custom chips. So, that's the short version of the semiconductor solution segment. It's obvious to see what the growth runway looks like there, but think about infrastructure software and how well this actually complements it.

Through a lot of their acquisitions, Broadcom owns software used to operate mainframes, secure corporate networks, and manage private cloud infrastructure. And so these are products that are embedded deeply inside the operations of large corporations. So a lot of the times there's high switching costs and they also generate substantial gross margins sometimes in the range of even 90%.

And so all of a sudden this becomes a recurring revenue business segment. So the two business segments somewhat balance each other. Semiconductors is exploding with growth. Meanwhile, infrastructure is very predictable, reliable cash flows that also has some pricing power.

And so while the acquisitions they made in the past absolutely did eat up a substantial amount of their cash flows, you can see the growth of operating cash flows is actually picking up. Like I said, 38% all the way up to 66%.

And just take a look at what that's done for free cash flow as well. The free cash flow growth rates are very high. And here's what you'll also notice. Free cash flow is only slightly lower than the net cash provided from operating cash flows. Again, it's because their free cash flow margins are so strong.

Now, perhaps most importantly is revenue is projected to continue to remain extremely strong. Revenue growth was a bit slower over the last couple of years, but it's expected to pick back up. Now, if we look at a few of these ratios, take a look at the gross margins. Like I said, they're quite strong. And again, notice while the company's growing at just substantial rates, high double digits, their gross margins have also been expanding. So, when revenues are growing at a double- digit rates, and you have gross margin in 2017 going from 48.25 25 all the way up to 67.7% in 2025. Obviously, that means earnings growth is going to be explosive.

Now, here's what a lot of people would point out. This is all great news, but this is backward looking metric. And when we look at forward valuations, it's a bit more concerning. You can see the Ford PE multiple was sitting at about 60 as of earlier this month. But with the stock's recent selloff, which wasn't a substantial sell-off, but it was a sell-off, the Ford PE multiple is down to about 33.59.

But the reality is again, I don't think that's a ridiculous price for Broadcom. And for example, just take a look at the analysis here from Forecaster. They give them a DCF price per share of almost $500. Now, the economic value added in EV sales definitely pulls the valuation down, but just take a look at what Ford returns actually look like if Broadcom gets anywhere close to achieving the earnings growth that analysts are stating that they will achieve.

So, for example, the projected EPS Kagger through the year 2030 is 31.81%. 81%. 31.8 just mind-blowing to think about. Look at how much the PE multiple can drop and the company still posts strong returns. Again, strong 12 month PE multiple right at 60. If this pulled all the way back to 30, what you can still see is compounded returns from 2029 to 2030 would just be ridiculously strong. Even if it fell to 25, we're still talking about way outperforming the market. And even at a 20p multiple, a 2030 compounded annual growth rate of 13.5. again way outperforms historic market averages.

Now again, this is assuming the average EPS growth estimate. It's not the best case scenario. It's certainly not the worst case scenario. The biggest risk would be the supply chain weakening, the AI supply chain. And so if that were to happen, obviously we'd see a huge reversion in the valuation multiple for the stock.

But over the long term, I do really like the business model. I love the recurring cash flows from the infrastructure software business segment. And of course, I love the growth from the semiconductor solution segment. And all at the same time, you're going to continue to get a substantially growing dividend payment.

And in fact, this is a stock I've held in my personal portfolio for a while now. On my original cost basis, I'm up around 500 600%. And of course, my dividend yield on cost for this position continues to climb higher despite the fact the stock is yielding below 1%. My yield on cost on my original shares is well above four, maybe even 5%.