Broadcom Enters the $2 Trillion Club, and 4 of the 5 Vanguard ETFs That Recently Split Their Stocks Include It. Here’s a Superior Low-Cost ETF for Long-Term Broadcom Investors.

On April 21, five low-cost exchange traded funds (ETFs) managed by Vanguard underwent stock splits. Notably, Broadcom (AVGO) is a primary holding in four of these funds.

The following day, April 22, Broadcom reached an all-time high, coinciding with a broader rally in the stock market.

In addition to its recent stock performance, Broadcom is enhancing its collaboration with Google Cloud on network observability using Broadcom’s AppNeta technology. Google also announced its latest Tensor Processing Unit (TPU) chips, specifically designed for artificial intelligence with TPU 8t for training and TPU 8i for inference, which are being co-designed with Broadcom.

With a market capitalization now exceeding $2 trillion, Broadcom joins an elite group of just seven companies worldwide, including Nvidia, Alphabet, Apple, Microsoft, Amazon, and Taiwan Semiconductor Manufacturing.

The success of Broadcom’s custom AI chip and AI networking segments has led to impressive revenue growth. Furthermore, its established non-AI semiconductor and software infrastructure divisions provide consistent cash flow, facilitating ongoing share buybacks and a streak of 15 years of dividend increases.

Even at its peak, Broadcom is viewed by many as a significant investment opportunity. However, some investors might choose to approach Broadcom via an ETF to diversify their holdings.

Here’s a look at how Broadcom ranks within Vanguard’s recently split ETFs and other dividend-focused ETFs that have significant amounts of Broadcom stock.

Broadcom’s Importance in Vanguard ETFs

Broadcom is a major player among growth stocks. Recently, the Vanguard Midcap ETF executed a 4-for-1 stock split, making the shares more accessible to investors at under $100.

All four funds maintain extremely low expense ratios, under $1 for every $1,000 invested. However, they do have some key distinctions worth noting.

The Vanguard Tech ETF has been the best performer among Vanguard ETFs over the past decade, featuring tech stocks like Nvidia, Apple, Microsoft, and Broadcom. Other major players include Alphabet, Amazon, Meta, Tesla, and Eli Lilly.

These stocks are also key holdings in the Mega Cap Growth, S&P 500 Growth, and Growth ETFs. A large portion of mega-cap growth ETFs is concentrated in just ten stocks. This focused approach has proven lucrative, with the fund being the second-best performer within Vanguard over the ten years.

In contrast, the Vanguard S&P 500 Growth ETF and Vanguard Growth ETF offer more diversification, with the latter having less Apple and more exposure to financial equities.

For growth-focused investors seeking to include Broadcom in their portfolios, all four ETFs are solid choices. Yet, the Vanguard High Dividend Yield ETF (VYM) might appeal more to those desiring balance.

Broadcom in a High-Yield ETF

Broadcom represents 6.3% of the high-yield ETF, a seemingly unusual position given its underweight in tech and higher weight in sectors like financials, industrials, healthcare, and consumer goods.

Currently, Broadcom’s yield is relatively modest at 0.6%. Just a few years back, it had a reputation as a steady, moderately growing tech firm with a reliable dividend.

Over the past decade, Broadcom has consistently delivered returns above 2%. Yet, as stock prices surged, the yields have contracted, despite ongoing dividend increases.

A similar pattern is seen with Caterpillar, another top holding in the Vanguard High Dividend Yield ETF; its stock also gained significantly due to AI-driven demand for specialized machinery.

High-yield ETFs don’t penalize stocks for outperforming, evolving beyond mere passive income vehicles to balance growth, income, and value. The ETF carries a price-to-earnings (P/E) ratio of 21.5x alongside a dividend yield of 2.4%, while Vanguard’s S&P 500 ETF, in contrast, offers a lower yield of just 1.2% and an expensive P/E ratio of 28.3x. Despite this, the high dividend yield ETF boasts a low expense ratio of only 0.04%.

Investing in ETFs Intentionally

A stock split doesn’t inherently alter the value of the underlying assets; it simply increases the total share count, lowering the cost of acquiring all shares of a company. However, a split alone doesn’t automatically render a stock or ETF an attractive buy. Recent analyses suggest variable outcomes from stock splits.

For those interested in adding Broadcom to their growth stock portfolio, examining any of the four recently split Vanguard ETFs holding the stock may be worthwhile. Conversely, those aiming for better passive income opportunities and broader exposure to Broadcom might find the Vanguard High Dividend Yield ETF more appealing.