At first glance, Broadcom (AVGO -0.46%) hardly looks like a dividend stock. The chip and infrastructure software giant pays $2.60 per share in annual dividends, and with the stock closing Friday at $381.92, that works out to a dividend yield of just 0.68%. Put $10,000 into the stock today, and you collect about $68 a year. Not too exciting.
But a current yield is just a snapshot, and snapshots don't show motion. What the 0.68% hides is a dividend that has been raised for 15 consecutive years and has multiplied nearly 13-fold over the past decade.
While this dividend's astounding growth isn't guaranteed to persist, it speaks to the quality of the underlying business.
Image source: The Motley Fool.
From a nickel to $0.65
Ten years ago, Broadcom's quarterly dividend was $0.51 per share. Adjusted for the company's 10-for-1 stock split in 2024, that's about a nickel. Today, the quarterly payout is $0.65. That's nearly 13 times the split-adjusted level of mid-2016, which works out to an annualized growth rate of about 29%.
To be fair, that decade includes one exceptional leap. In December 2016, Broadcom's board doubled the payout in a single stroke.
The pace has settled down since. Over the past five years, the quarterly dividend has climbed from a split-adjusted $0.36 to $0.65, about 12.5% annualized. The latest increase, announced in December alongside the company's fiscal fourth-quarter results, was 10%.
Growth in the 10% to 12% range may sound ordinary next to that 29% figure. But it adds up. A dividend compounding at 12% doubles about every six years -- and Broadcom has sustained double-digit increases while pouring money into acquisitions and its artificial intelligence (AI) chip business.
The cash behind the raises
A dividend is only as good as the cash flow covering it, so the first thing I check is how easily the company pays its bill.
In its fiscal second quarter of 2026 (ended May 3, 2026), Broadcom generated $10.3 billion of free cash flow, an enormous 46% of its $22.2 billion in revenue. Dividend payments during the quarter came to $3.1 billion -- about 30% of that free cash flow, leaving plenty behind. Indeed, Broadcom put another $600 million into share repurchases during the period.
Measured against earnings, the annual dividend runs at about 43% of the past year's earnings per share.
Part of what makes that coverage so comfortable is Broadcom's business model. Unlike the cloud giants spending tens of billions of dollars on data centers each quarter, Broadcom designs chips and sells infrastructure software. Its capital expenditures in the quarter were just $231 million against $10.5 billion of operating cash flow.
And the growth engine funding future raises is accelerating. Broadcom's fiscal second-quarter revenue rose 48% year over year, powered by AI semiconductor revenue of $10.8 billion, up 143%.
"The momentum continues and in Q3 we expect semiconductor revenue from AI to grow over 200 percent year-over-year to $16.0 billion," said CEO Hock Tan in the fiscal second-quarter earnings release.
NASDAQ: AVGO
Key Data Points
Of course, there are caveats. Dividend growth could slow if AI spending cycles turn or if management prioritizes acquisitions.
And the stock itself is priced for its AI growth, not its dividend. Shares trade at about 64 times earnings, a price that assumes the extraordinary AI momentum continues. Anyone buying today is paying growth-stock prices and receiving the dividend as a small bonus.
So no, Broadcom won't solve anyone's income needs this year. But this is what the early years of a big income stream tend to look like. The yield is small, the share of cash flow committed is low, and the board keeps raising the payout while the business underneath compounds.
Given a long enough time, Broadcom could transform into a powerful dividend stock.
