Case report for Linear Technology
The main purpose of the report is to make a decision for Linear Technology on dividend policy. The report analyzed the impact of changing future dividend policy on the value of the company, based on its historical performance, financial history and market trends.
Linear Technology is a large-scale company which focus on the analog segments within semiconductor industry. It went public in 1986 and announced its dividend policy on 1992. Nowadays, under the market environment where dividends are unwilling to be paid, Linear still insisted its dividend commitment.
Now Linear Technology is experiencing some difficulties with its profits that its quarter sales number in 2003 was far below that in last fiscal year, despite some growth. Changing dividend policy under such circumstances, therefore, will bring problems such as destroying investment opportunities and affecting executive stock options.
In order to seek solutions for Linear Technology, this report will balance pros and cons of dividend change. The main purpose of the analysis is to find out whether Linear Technology should increase its dividend payout.
Linear Technology’s Payout Policy
The payout policy of Linear Technology can be concluded into two elements: dividend payment and repurchase activities.
To maintain competitiveness, Linear paid a dividend for about 10 years. It first initiated a quarterly dividend of $0.00625 per share in 1993. The payout ratio is closer to 25% to 30% consistently during these years. Dividend yields various from 0.03% to 0.25% unevenly for the price per share is fluctuated. Dividend per share rises from $0.00625 in 1993 to $0.05 in 2003. And since 2000, the dividend begins to growth by $0.01 in every four fiscal quarters. During the decade, it seems Linear’s dividend policy goes less volatile, which may broaden the client base and somehow shows the desire of the company to be recognized as a more mature and confident.
Besides, the linear start to repurchase
Linear Technology is a large-scale company which focus on the analog segments within semiconductor industry. It went public in 1986 and announced its dividend policy on 1992. Nowadays, under the market environment where dividends are unwilling to be paid, Linear still insisted its dividend commitment.
Now Linear Technology is experiencing some difficulties with its profits that its quarter sales number in 2003 was far below that in last fiscal year, despite some growth. Changing dividend policy under such circumstances, therefore, will bring problems such as destroying investment opportunities and affecting executive stock options.
In order to seek solutions for Linear Technology, this report will balance pros and cons of dividend change. The main purpose of the analysis is to find out whether Linear Technology should increase its dividend payout.
Linear Technology’s Payout Policy
The payout policy of Linear Technology can be concluded into two elements: dividend payment and repurchase activities.
To maintain competitiveness, Linear paid a dividend for about 10 years. It first initiated a quarterly dividend of $0.00625 per share in 1993. The payout ratio is closer to 25% to 30% consistently during these years. Dividend yields various from 0.03% to 0.25% unevenly for the price per share is fluctuated. Dividend per share rises from $0.00625 in 1993 to $0.05 in 2003. And since 2000, the dividend begins to growth by $0.01 in every four fiscal quarters. During the decade, it seems Linear’s dividend policy goes less volatile, which may broaden the client base and somehow shows the desire of the company to be recognized as a more mature and confident.
Besides, the linear start to repurchase