Please ensure Javascript is enabled for purposes of website accessibility

Why Broadcom Stock Jumped Today

By Joe Tenebruso – Dec 10, 2021 at 4:32PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The semiconductor leader's investors have larger dividend payments headed their way.

What happened

Shares of Broadcom (AVGO -0.48%) climbed 8.3% on Friday after the chipmaker said it would return more cash to shareholders in the year ahead. 

So what

Broadcom's revenue rose 15% year over year to $7.4 billion in its fiscal 2021 fourth quarter. Revenue in the company's semiconductor solutions and infrastructure software divisions increased 17% and 8%, respectively, to $5.6 billion and $1.8 billion.

"Broadcom concluded the year with record fourth-quarter results driven by a rebound in enterprise, and continued strength from cloud and service provider demand," CEO Hock Tan said in a press release.

Rolls of dollar bills are rising in a stair-step manner.

Image source: Getty Images.

Moreover, Broadcom's profitability and cash flow production strengthened. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) leaped 19% to $4.5 billion. Broadcom's free cash flow, meanwhile, grew 6%.

"In fiscal 2021, we achieved record adjusted EBITDA margin of 60%, generating $13.3 billion of free cash flow, or 49% of revenue," chief financial officer Kirsten Spears said.

Management intends to pass a sizable portion of that cash on to shareowners. Broadcom boosted its quarterly dividend by 14% to $4.10 per share. It also announced plans to buy back $10 billion worth of its stock.

"The initiation of a new share repurchase program reflects the confidence of the board of directors in Broadcom's strong cash flow generation and provides us with a complementary tool to deliver value to our stockholders," Spears said. 

Now what

Broadcom expects to earn revenue of roughly $7.6 billion in the first quarter of fiscal 2022. The company also guided for an adjusted EBITDA margin of about 61.5%.

Looking further ahead, Tan expressed optimism in Broadcom's long-term competitive position. "With the strength and breadth of our IP [intellectual property] portfolio, we continue to be able to uniquely deliver leading-edge, best-in-class semiconductor solutions, and extend our leadership in our franchise markets," Tan said.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Broadcom Ltd. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.