AVGO is a high-growth dividend stock supported by strong financials, low valuation relative to sector, and projected FCF growth from AI demand; ranked third among top picks.

This stock here is another investment in the semiconductor sector. It's a stock that Wall Street is obsessed with because of its growth in artificial intelligence, but like others, not enough is being talked about the fact that they also pay growing dividends.

This stock is Broadcom, the giant custom chip and enterprise infrastructure company, ticker symbol (AVGO), into which BlackRock injected another $4.2 billion in the last quarter, bringing their total stake in the company to about $150 billion.

Incidentally, just like the others, we are talking here about a very dominant and thriving business, one that simply dominates the market for custom chips, developing them for tech giants such as Google, Meta, OpenAI, Anthropic, and many more.

Once these giants build multibillion- dollar data centers based on custom Broadcom chips, the costs of migration become very high, resulting in a huge influx of recurring revenue for them, which also includes a lot of software services revenue, a lot of AI networking, enterprise software, cybersecurity, which is also a huge area for them, and much more .

Therefore, Broadcom is very well diversified within its own area of expertise as well.

For example, in the last quarter, total revenue rose by 86% year-on-year , while operating income rose by an even greater 92% year-on-year, and free cash flow was roughly half of their total revenue.

So, the financial results are amazing and the profit margins are strong, and that's what has really allowed them to pay out growing dividends, which in my opinion are also being largely ignored.

In fact, when Broadcom first started distributing dividends, I believe it was in 2010 under the name Avago, it was paying the equivalent of less than one penny per share after adjusting for the stock split.

But today, that distribution has reached $2.60 annually, meaning their distributed profits have grown more than 90 times over the past fifteen years. So, the only reason the return is less than 1% today is simply that the stock price has also skyrocketed.

But early investors were reaping huge profits from all those distributions, which we can refer back to our percentage calculator to see what that might look like.

Even if we only look at the last ten years, where we narrow down the time range, we can go further and the ratio will be much higher. But for Broadcom , 10 years ago, the share price was around $17 .

With a dividend of $2.60, you're now talking about a return of over 15% for investors who bought the stock just 10 years ago, in 2016.

Now, those distributed profits continue to grow, not only because the payout ratio is very low at 26%, but analysts also expect their free cash flow to nearly triple over the next two years thanks to the increasing demand from artificial intelligence.

Therefore, if management remains committed to those dividend payouts as they have been in the past, which we can clearly see, and I see no reason why they shouldn't continue to do so in the future, then this stock can certainly easily become a high- growth dividend stock as well.

I think the numbers prove it, and even the valuation is very good here, thanks to the recent price drop coupled with the huge growth in net profits. Their price-to-earnings-to-growth (PEG) ratio is more than 50% lower than the sector average, which is truly remarkable.

Now, I don't think I can rank them above Nvidia or Microsoft just because of the sheer size and dominance those companies enjoy. But this looks like a very close three-way race, as you can see here.

But Broadcom will barely come in third in our rankings, and I'll have to push KLA to fourth because of that.

Now, I like Lily a lot and would give it preference over KLA, but I can't rank it on the same level as companies like Nvidia, Microsoft, or Broadcom, which I trust a little more and which are in my portfolio.