Linear Technology

In: Business and Management

Submitted By happy111
Words 337
Pages 2
1. Describe Linear Technologies payout
Being very successful and having positive cash flows, Linear Technology announced its first dividend payment to its shareholders in October 1992. This is for giving the credibility to investors. Linear set dividend at $0.05 per share and this amounted to $8.3 million, or 15% of 1994 earnings. Linear continued their policy to increase dividend in 2002 when company's drop in sales and earnings so their payout ratio increased to 25%~30%. Considering the general trend that the number of dividend payers decreased, Linear is out of the trend and distinguished from other companies. It could be some signals. Also, as another rewarding methods to shareholders they spent more on repurchasing shares than on paying dividends to reduce the dilution.
-What are Linear's financing needs?
Since the technology industry has suffered from recession, Linear Technology's sales and earnings decreased compared to 2001. Also, they wanted to expand their company abroad especially in Asia. These factors show Linear need some cash. On the other hand, even in recession, Linear kept a positive net income and net cash flow. This is because Linear had established variable cost structure early in its existence and used profit sharing, employee stock option compensation. Also, they managed their cash conservatively in short-therm debt securities and it meant high cash liquidity. Linear's stable and modest research and development costs contributed to their positive financing statement. In addition, recently they have no plan of M&A or entering other industry that consume large amount of money. Considering all of these factors, Linear Technology seems that they need relatively just small financing.
-Should Linear return cash to its shareholders?
Paying dividend taxed twice at the corporate level and at the stockholder level. However, recently both…...

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