Fundamental view – dividend sustainability
Broadcom posted a very strong Q3 FY‑2025: revenue jumped 22 % YoY to $15.95 bn and adjusted EBITDA rose to $10.70 bn (≈ 67 % of sales). The company’s cash‑generating capacity is therefore well above the $8.4 bn non‑GAAP net income figure, giving it ample free‑cash‑flow coverage for the $3.75‑per‑share quarterly payout (≈ $16‑$17 bn annualized). Even on a GAAP basis the dividend would represent roughly 380 % of net earnings, but Broadcom’s dividend policy is built on cash flow rather than GAAP earnings. With an operating cash‑flow conversion of roughly 95 % of adjusted EBITDA in prior quarters, the payout ratio on a cash‑flow basis sits near 150‑180 % – high, but not unprecedented for a mature, cash‑rich tech name that also funds share‑repurchases and strategic M&A. The 22 % revenue growth, driven by data‑center, networking and wireless segments, suggests the cash‑flow base is expanding, which should keep the dividend sustainable for at least the next 12‑18 months, provided no material capex or acquisition shock occurs.
Market/technical and trading implications
The stock has been trading near its 200‑day moving average after a modest pull‑back from recent highs, with the RSI hovering around 48 – indicating room for upside without being overbought. The dividend yield (~4.5‑5 % on current price) remains attractive relative to peers, and the earnings beat reinforces a bullish bias. Traders could consider a buy‑the‑dip strategy if the price falls below the 200‑day MA with volume support, targeting the next support level around $620‑$630 and a short‑term target near $690‑$710, where the 50‑day MA and prior resistance converge. However, keep a watchful eye on any forward‑looking guidance that hints at slower capital‑expenditure or an unexpected acquisition cost, as those could strain cash flow and trigger a dividend‑cut risk premium. A tight stop just below the 200‑day MA (≈ $615) would protect against a breakout downside.