By: Dividend Sensei
Great M&A can build wealth compounding empires and almost no one does smart M&A better than Broadcom.
AVGO has been diversifying into software for four years and is now making its largest deal in history, buying VMW for $61 billion.
50% of sales will now come from recurring software sales, creating the most stable cash flow in the industry. This is why analysts, rating agencies, and bond investors all love this deal.
CEO Hock Tan is a mad genius who has proven he can make dividend investors rich, and this deal should help AVGO deliver on its 10+% growth and 13+% total return guidance for mans years to come.
Analysts expect AVGO to potentially deliver Buffett-like 22% annual returns for many years to come.
AVGO is buying VMW for 7.2X post-synergy cash-adjusted earnings, a fantastic bargain.
Today AVGO is about 6% undervalued at 13.4X cash-adjusted earnings, a classic Buffett-style “wonderful company at a fair price.”
Analysts think AVGO could deliver 150% returns in the next five years, beating the market by 4X and that might prove conservative.