Critical Survey: United Microelectronics (NYSE:UMC) and Broadcom (NASDAQ:AVGO)

United Microelectronics (NYSE:UMC) and Broadcom (NASDAQ:AVGO) are both large-cap computer and technology companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, analyst recommendations, profitability, institutional ownership and risk.

Analyst Ratings

This is a breakdown of recent ratings and target prices for United Microelectronics and Broadcom, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
United Microelectronics	1	3	0	0	1.75
Broadcom	0	2	24	0	2.92

United Microelectronics currently has a consensus price target of $7.40, suggesting a potential upside of 29.71%. Broadcom has a consensus price target of $225.83, suggesting a potential downside of 7.71%. Given United Microelectronics’ higher probable upside, analysts clearly believe United Microelectronics is more favorable than Broadcom.

Dividends

United Microelectronics pays an annual dividend of $0.35 per share and has a dividend yield of 6.1%. Broadcom pays an annual dividend of $2.36 per share and has a dividend yield of 1.0%. United Microelectronics pays out 60.3% of its earnings in the form of a dividend. Broadcom pays out 192.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Broadcom has raised its dividend for 13 consecutive years. United Microelectronics is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares United Microelectronics and Broadcom’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
United Microelectronics	20.35%	12.78%	8.16%
Broadcom	11.43%	28.00%	11.16%

Volatility and Risk

United Microelectronics has a beta of 1.17, indicating that its share price is 17% more volatile than the S&P 500. Comparatively, Broadcom has a beta of 1.03, indicating that its share price is 3% more volatile than the S&P 500.

Institutional & Insider Ownership

5.1% of United Microelectronics shares are owned by institutional investors. Comparatively, 76.4% of Broadcom shares are owned by institutional investors. 8.0% of United Microelectronics shares are owned by company insiders. Comparatively, 2.0% of Broadcom shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares United Microelectronics and Broadcom”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
United Microelectronics	$7.09 billion	2.02	$1.95 billion	$0.58	9.84
Broadcom	$51.57 billion	22.24	$5.90 billion	$1.23	199.59

Broadcom has higher revenue and earnings than United Microelectronics. United Microelectronics is trading at a lower price-to-earnings ratio than Broadcom, indicating that it is currently the more affordable of the two stocks.

Summary

Broadcom beats United Microelectronics on 11 of the 17 factors compared between the two stocks.

About United Microelectronics

United Microelectronics Corporation operates as a semiconductor wafer foundry in Taiwan, China, Hong Kong, Japan, Korea, the United States, Europe, and internationally. The company provides circuit design, mask tooling, wafer fabrication, and assembly and testing services. It serves fabless design companies and integrated device manufacturers. United Microelectronics Corporation was incorporated in 1980 and is headquartered in Hsinchu City, Taiwan.

About Broadcom

Broadcom Inc. designs, develops, and supplies various semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The company operates in two segments, Semiconductor Solutions and Infrastructure Software. It provides set-top box system-on-chips (SoCs); cable, digital subscriber line, and passive optical networking central office/consumer premise equipment SoCs; wireless local area network access point SoCs; Ethernet switching and routing custom silicon solutions; serializer/deserializer application specific integrated circuits; optical and copper, and physical layer devices; and fiber optic components and RF semiconductor devices. The company also offers RF front end modules and filter; Wi-Fi, Bluetooth, and global positioning system/global navigation satellite system SoCs; custom touch controllers; inductive charging; attached small computer system interface, and redundant array of independent disks controllers and adapters; peripheral component interconnect express; fiber channel host bus adapters; read channel based SoCs; custom flash controllers; preamplifiers; optocouplers, industrial fiber optics, and motion control encoders and subsystems; light emitting diode, ethernet PHYs, switch ICs, and camera microcontrollers. Its products are used in various applications, including enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom Inc. was founded in 1961 and is headquartered in Palo Alto, California.