Monday, July 22, 2019

Broadcom Opportunity for income

I sure wish I owned a lot more Broadcom symbol AVGO.  While the stock price volatility can make you a bit squeamish, the dividend income and call option potential make this a stock to own in your income investing portfolio.   Want to retire with income that grows, then consider AVGO.

The knock on AVGO is the price earnings ratio which is in the high 30's.   My readers may find it odd that I own a stock with such a high P/E ratio but I am not so old that I do not need some growth in our portfolio.  When I can buy growth with a good dividend and call option potential, the fear that comes with volatility is easier to handle.  I get paid to wait.

AVGO Covered Call sold today


























The ex-dividend date has not yet been announced and the date could fall after the call expires.  Using their previous history of the ex-dividend date in Septembers, we anticipate the ex-dividend date to be September 18, 2019 (source dividend max.)


Another way to look at this call is if you initiated a position today.

























AVGO Dividend Machine Fundamentals

AVGO is a dividend machine as far as yield and dividend growth.  You will notice an increase in D/E (debt to equity ratio.)  This increase would be troublesome to me if it was used only to inflate price with stock buy backs.  I interpret the increase in debt as using cheap money to fund future growth and to fund future dividend increases.

For those who prefer free cash flow to determine safety of the dividend, you can find comfort in looking at the fundamental details in the table below.


Dividend increases are very important to investors who want to retire on income that grows.  Here is a chart of AVGO's dividend increases over time.








AVGO Volatility



For the ordinary investor, AVGO is a bit expensive.  Today it trades around $297.  You have to own at least 100 shares to sell one contract.  If you want to sell calls on only part of your position to mitigate the lost opportunity if your shares are called away by the call buyer, you need over $60,000 to invest to buy at least 200 shares.

I will not add here.  However, I will add should AVGO's stock price retreats to the $250 range.

AVGO one year price range



Another idea for income investors who want to retire with income that grows.  You get paid to wait through volatility with the dividend and you have opportunities for both growth and additional income.

M* MoneyMadam

Disclosure:  Long AVGO with calls