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3 Artificial Intelligence (AI) Dividend Growth Stocks to Buy and Hold for the Long Term
AVGOBroadcom(AVGO) The Motley Fool·2024-12-29 12:00

Broadcom - Broadcom specializes in chips for connectivity applications such as networking, server storage, and broadband, and has built enterprise infrastructure software into about 40% of its business [15] - The company generated 51.5billioninrevenueinfiscalyear2024,with51.5 billion in revenue in fiscal year 2024, with 19.4 billion (37%) in free cash flow [21] - Broadcom's AI-related revenue totaled 12.2billionthisyear,withmanagementexpectingsubstantialgrowthasAIchipdealsprogress[20]−AnalystsestimateBroadcomwillgrowearningsbyanaverageofnearly2212.2 billion this year, with management expecting substantial growth as AI chip deals progress [20] - Analysts estimate Broadcom will grow earnings by an average of nearly 22% annually over the long term [7] - The company has paid and raised its dividend for 15 consecutive years, with an average hike of 14.7% over the past five years, and the current payout ratio is only 48% of fiscal year 2024 earnings [7] Microsoft - Microsoft is on a 22-year dividend growth streak and has an AAA credit rating, higher than the U.S. government [2][14] - The company has integrated AI throughout its software products to enhance user experience and owns Azure, the world's second-largest cloud computing platform, which is fueled by AI applications [8][14] - Microsoft reached a 3.2 trillion market cap and $254 billion in annual revenue, with analysts estimating earnings growth of 13% annually over the long term [18] - The dividend payout ratio is only 26% of 2024 earnings estimates, providing financial flexibility and security [2][17] Meta Platforms - Meta Platforms initiated its dividend this year and has strong potential for dividend growth, with a payout ratio of only 9% of 2024 earnings estimates [9][10] - The company is heavily investing in AI, including creating an open-source AI model (Llama) and building data centers to support its computing requirements [5] - Meta is the world's best advertising business, generating profits by showing digital ads to 3.29 billion daily users across Facebook, Instagram, WhatsApp, and Threads [19] - Analysts estimate earnings will rise by an average of 17% annually over the long term, supporting high dividend growth with a low payout ratio [6] AI Industry - AI is a transformative technology with long-term investment potential, and some leading AI companies pay dividends, offering both capital gains and passive income [4][13] - Companies like Broadcom, Microsoft, and Meta Platforms are leveraging AI to enhance their core businesses and create growth opportunities, making them strong candidates for long-term wealth compounding [11][12]