Updated 3/6/25

Avnet, Inc. (AVT) is a name that might not grab headlines, but it plays a crucial role in the tech industry. As a major distributor of electronic components, the company connects manufacturers with the parts they need to build everything from consumer gadgets to industrial equipment. Founded in 1921, Avnet has built a reputation as a steady, well-established player in a cyclical business.

For dividend investors, the company presents an interesting case. It offers a reasonable yield, solid cash flow, and a history of dependable payouts. But does it check all the boxes for long-term income seekers? Let’s break it down.

🔑 Key Dividend Metrics

📈 Dividend Yield: 2.69% (slightly above its five-year average)
💰 Annual Dividend Payout: $1.32 per share
🔄 Dividend Growth: Slow but steady increases over time
🛡️ Payout Ratio: 36.16% (comfortably sustainable)
📆 Next Dividend Date: March 19, 2025 (Ex-dividend: March 5, 2025)
📊 5-Year Average Dividend Yield: 2.46%

Dividend Overview

Avnet offers a dividend yield of 2.69%, which is decent compared to historical levels. It’s not the kind of yield that jumps off the page, but for a company in the tech distribution space, it’s a respectable payout.

One of the biggest positives is the payout ratio, sitting at just over 36%. That’s a healthy level, meaning the company is paying shareholders while keeping enough earnings to reinvest in its business. A payout ratio this low suggests that the dividend is not at risk of being cut unless there’s a major financial downturn.

For those who appreciate consistency, Avnet’s dividend payments have been reliable. While growth has been on the slower side, investors have been able to count on regular income from the stock.

Dividend Growth and Safety

When it comes to dividend growth, Avnet isn’t breaking any records, but it has been moving in the right direction. The company’s approach to payouts is measured, balancing shareholder rewards with business reinvestment.

What makes Avnet’s dividend relatively safe is its strong free cash flow, which sits at around $1.44 billion. That’s more than enough to cover its dividend obligations without putting stress on the balance sheet.

However, one potential downside is the company’s industry. Tech component distribution is cyclical, meaning earnings can fluctuate. If the economy slows or demand for electronics weakens, revenue could take a hit. That’s something to keep in mind for those who prefer dividend stocks with more predictability.

Chart Analysis

The stock chart for Avnet (AVT) shows a notable shift in momentum over the past several months. After experiencing a steady uptrend for much of last year, the stock has recently broken down below key moving averages, signaling potential weakness in the near term.

Moving Averages and Trend Breakdown

The 50-day moving average (orange line) has turned downward and crossed below the 200-day moving average (blue line)—a bearish signal known as a death cross. This crossover often indicates a shift from a bullish phase to a more prolonged period of selling pressure. The stock price has also fallen below both moving averages, reinforcing the idea that momentum is currently to the downside.

This breakdown is particularly significant given that the 200-day moving average had been acting as strong support for much of last year. With the stock now trading well below it, former support could turn into resistance, making it harder for AVT to regain its previous highs in the short term.

Volume and Selling Pressure

Looking at the volume, there was a large spike in trading activity in early December, suggesting a potential distribution phase. Since then, volume levels have returned to a more typical range, but there has been a noticeable increase in red bars—indicating more selling pressure than buying demand.

This aligns with the recent price action, where each rally attempt has been met with renewed selling, preventing the stock from making a meaningful recovery. The lack of strong buying volume on rebounds suggests that investors are hesitant to step in aggressively at current levels.

Relative Strength Index (RSI) and Oversold Conditions

The RSI (Relative Strength Index) at the bottom of the chart has been trending downward, hovering near the 30 level, which is generally considered oversold territory. When RSI reaches these low levels, it often suggests that a stock is due for a short-term bounce. However, oversold conditions alone don’t guarantee a reversal—especially when momentum and trend structure remain weak.

If RSI continues to stay low without a significant price rebound, it could indicate persistent weakness rather than an immediate buying opportunity. On the other hand, if the stock manages to stabilize and RSI starts turning upward, it could suggest that selling exhaustion is setting in.

Recent Candlestick Action

Looking at the last few trading sessions, there’s been a sharp drop followed by a slight rebound, with recent candles showing long lower wicks. This suggests some buyers are stepping in at these levels, but so far, there hasn’t been enough strength to push the price meaningfully higher.

If the next few candles show continued hesitation around this level, it could indicate a temporary support zone forming. However, if sellers regain control and push the stock below its recent lows, it could open the door for another leg lower.

Analyst Ratings

In recent months, Avnet (AVT) has received a mix of analyst opinions, reflecting both optimism and caution regarding the company’s future performance.

Upgrades:

📈 Truist Securities: On January 30, 2025, an analyst maintained a Hold rating on Avnet but raised the price target from $48 to $52. This adjustment suggests a more favorable outlook, possibly due to anticipated stabilization in the semiconductor market.

📊 Stifel: Another analyst reiterated a Hold rating on August 9, 2024, while increasing the price target from $50 to $55. This indicates a cautiously optimistic view, potentially based on expectations of improved market conditions.

Downgrades:

🔻 Bank of America: On January 30, 2025, an analyst downgraded Avnet from Neutral to Underperform, reducing the price target from $58 to $48. This change reflects concerns about Avnet’s ability to recover margins in a competitive environment.

⚠️ Wells Fargo: An analyst maintained an Underweight rating on August 9, 2024, but slightly raised the price target from $40 to $45. Despite the small increase, the continued cautious stance indicates ongoing reservations about Avnet’s near-term prospects.

📉 The consensus among analysts is a Reduce rating, with an average 12-month price target of approximately $50. This reflects a cautious outlook, balancing potential stabilization in the semiconductor market against concerns about Avnet’s competitive positioning and margin recovery.

Earnings Report Summary

Avnet’s latest earnings report reflected some of the challenges the company is facing in a slower market, but there were also a few bright spots worth noting.

Revenue for the most recent quarter came in at $5.7 billion, down from $6.2 billion in the same period last year. A drop in sales wasn’t entirely unexpected, given the broader softness in demand for electronic components. However, one area of resilience was Asia, where the company actually saw growth—something management pointed out as a positive takeaway.

Earnings took a bit of a hit as well. Diluted earnings per share (EPS) landed at $0.99, down from $1.28 a year ago. On an adjusted basis, EPS came in at $0.87, compared to $1.40 previously. Operating income margin also saw a decline, falling from 3.8% to 2.7%, reflecting the pressure on profitability. These numbers suggest Avnet is navigating some headwinds, likely tied to pricing challenges and a more competitive environment.

One encouraging sign in the report was strong cash flow generation, with over $300 million in cash from operations. The company has also been proactive in managing inventory, reducing it by more than 6% from the previous quarter. In industries like distribution, keeping inventory levels under control is key to maintaining financial flexibility, so this is a positive move.

Avnet also continued to return cash to shareholders. The company repurchased $51 million worth of shares, representing about 1.1% of outstanding stock, and paid out $29 million in dividends. This reinforces the company’s commitment to rewarding shareholders even in a tougher business environment.

CEO Phil Gallagher acknowledged the challenges, but he emphasized Avnet’s focus on improving efficiency and optimizing inventory to keep cash flow strong. He also pointed out that despite the near-term pressures, Avnet remains a crucial link in the technology supply chain, helping connect suppliers with customers that rely on its services.

Overall, the latest earnings report reflects a mix of pressures and strategic adjustments. Sales and earnings were down, but the company’s focus on cash flow, inventory management, and shareholder returns shows it is positioning itself to ride out the current market conditions. While the near-term outlook may be uncertain, Avnet is clearly taking steps to strengthen its financial footing.

Financial Health and Stability

Avnet has a solid financial foundation, but there are a few areas that investors should watch.

The company’s cash reserves stand at $172 million, which is adequate but not overly large. Meanwhile, total debt is on the higher side at $2.79 billion, giving it a debt-to-equity ratio of 57.58%. That’s not alarming, but it does suggest the company carries a fair amount of leverage.

A bright spot is its current ratio of 2.39, which indicates strong short-term liquidity. Essentially, Avnet has enough assets on hand to cover its short-term obligations, which adds a layer of financial security.

Looking at profitability, return on equity sits at 6.45%, which is somewhat low. It’s not a dealbreaker, but it does mean the company isn’t generating massive profits relative to shareholder equity.

Overall, Avnet’s financials are in decent shape, with enough cash flow to support the dividend. However, the debt load is something to monitor, especially in a high-interest-rate environment.

Valuation and Stock Performance

At around $49 per share, Avnet is trading at a price-to-earnings (P/E) ratio of 13.87. That’s relatively low, suggesting the stock may be undervalued compared to the broader market.

Other valuation metrics paint a similar picture:

• The price-to-book (P/B) ratio is 0.88, meaning the stock is trading below book value.
• The price-to-sales (P/S) ratio is 0.20, which is quite low for a company of its size.
• Enterprise value to EBITDA sits at 8.93, which is fair but not screamingly cheap.

In terms of stock performance, Avnet has traded between $45.50 and $59.24 over the past year. While it has underperformed the S&P 500, which gained over 13% in the same period, the stock appears to offer value for those looking at long-term income potential.

Risks and Considerations

No dividend stock is without risk, and Avnet has a few that investors should consider.

First, its business is highly cyclical. When demand for electronics is high, Avnet does well. But when the market slows, revenue and earnings can decline. This has already been reflected in the most recent earnings report, with revenue down 8.7% year over year.

Debt is another factor to watch. While the company generates strong cash flow, carrying nearly $2.8 billion in debt means it must manage interest payments carefully. A high-interest-rate environment could add some pressure.

Another potential drawback is the slow pace of dividend growth. While the payout is secure, it doesn’t have the rapid annual increases seen in dividend aristocrats. Investors looking for strong dividend growth may prefer other stocks with more aggressive hikes.

Final Thoughts

Avnet offers a stable dividend with a reasonable yield, strong cash flow coverage, and an attractive valuation. It’s not a flashy stock, but for those who appreciate consistency and financial discipline, it’s a name worth considering.

The biggest strengths here are a sustainable payout ratio, steady cash flow, and a stock that appears relatively cheap. However, the company’s cyclical nature and moderate debt levels mean it may not be the best fit for ultra-conservative dividend investors.

For those comfortable with a bit of economic fluctuation, Avnet provides dependable income with room for growth. It may not be the most exciting dividend stock out there, but sometimes boring and reliable is exactly what income investors are looking for.