Broadcom and Verizon (NYSE:VZ) are playing a big role in the wireless sector. Broadcom’s chips and software support broadband, while Verizon gives the service.
However, investors might easily overlook how both changed into high dividend companies that pay well over the average S&P 500 dividend 1.4%. Also, given the business of each of them, the current market performance will likely not affect these dividends.
Dividend investors can benefit from Broadcom’s $14.40-per-share annual dividend. It gives a cash return of around 3.3%, and the payout has gone up once a year since 2010.
Given that Broadcom’s business is so strong, these payout increases will likely continue. The company gets its revenue from two places: semiconductor products and infrastructure applications. In 2020, Broadcom spent about $5 billion in R&D, a 6% uptick from 2019.
That money helps Broadcom give solutions in areas like data centers and server storage. However, their current cash cow is their Wi-Fi 6E product, a chip giving faster speeds. This technology has helped them land multi-billion-dollar deals with Samsung and Apple.
These successes produced around $11.6 billion in fiscal 2020 for the company, a 25% growth from 2019 levels. Also, Q1’s $3 billion in cash was an increase of 36% compared to the same time last year. With around $570 million being paid in interest and over $1.5 billion going to investors in the form of dividends in the first quarter of 2021, Broadcom should be easily able to keep its dividend payouts going.
With these competitive advantages and increasing cash flows, Broadcom is a great dividend company to own for anyone seeking regular income.
2. Verizon Communications
Verizon revealed recently that their debt went up by more than $29 billion compared to one year ago as the firm invested large sums into licensing spectrum.
But regardless, conditions keep going in favor of Verizon and its dividend. With news coming out that competitor AT&T (NYSE:T) will lower its dividend, meaning that Verizon’s 4.4% payout will now exceed AT&T’s dividend.
Verizon’s $2.51-per-share yearly payout has increased every year since 2007, and executives have signaled that these raises will continue. The company can hold that pace. Their $5.2 billion in free cash flow from last quarter helped the firm pay $1.1 billion in interest and $2.6 billion in dividends.
Moreover, after buying Yahoo! and AOL, Verizon realized that going the route of AT&T into big media purchases would not work well. So it has now chosen to spin off Verizon Media.
And since it did not invest much in these losing companies. This allowed Verizon to buy $45 billion worth of licensed spectrum at auction, almost 2x what competitor AT&T spent. This spectrum will boost coverage quality above its 5G offering.
Such coverage will be crucial as it moves into a network-as-a-service company. As Hans Vestberg, CEO, said during the Q1 conference call, the company creates a new source of income as Verizon can more better support Amazon’s edge sector or Honda’s driverless cars.
Also, income investors can benefit from Verizon only trading for around 12 times earnings. This is well under T-Mobile US’s 55 multiple. Making the stock a must-buy for investors seeking regular payments.
Author: Blake Ambrose