Dividend Policy at Linear Technology Case Solution & Answer

Dividend Policy at Linear Technology Case Study Analysis

Introduction

Linear Technology was found by Robert Swanson in 1981, in California. It has been occupied with assembling and planning the specially crafted incorporated semiconductors (circuits) for electronic applications in the PC, media transmission, and the car businesses. It is the seventh biggest organization, recorded on SOX (Philadelphia trade semiconductor list). The predictable development and accomplishment of the organization depend on first in class designers and assembling of high performing items.

In 1992, the organization started the profit and expanded its profit year from that point by around 0.01 dollars per share. In the budgetary year 2002, the organization experienced the first critical decrease in quite a while deals since its IPO (starting open contributions) in 1986. The deals of the organization had dropped by 47 percent and its item’s interest had fallen by 54 percent. In the spring of 2003, Paul Coghlan – the CFO at Linear Technology was concerned and confronted with the quandary in regards to settling on an urgent choice that choosing whether or not should he recommend another ascent in the profits with center thought over lifting the payout proportion of profit to 33.1 percent higher than the innovation as firm’s standard.

Situational Analysis

Question 4

Dividend Payout Ratio and Dividend Yield

The dividend payout ratio of the company has been calculated for twelve years in Exhibit 1. This percentage is the amount paid to the shareholders of the company from its income. The dividend payout ratio of the company is good as it has fluctuations but shareholders are receiving more than 9% of income. Dividend yield is 5.14 in Exhibit 2 this is not a good yield.

Payoutpolicy

The current payout policy of the company is based on two approaches, which include: stock repurchase and dividend payout. The dividend was declared by the organization in the monetary year 1992 because of the good desires, following which the picked up the top situation in the business alongside having positive incomes since the underlying open contributions (IPO). The declaration of the organization’s profits on the yearly premise mirrors its solid situation in the unsafe market. The center explanation for offering the profit was having an entrance to the new arrangement of speculators, through which the organization could have more pay and satisfy its development objectives. The profits of the organization expanded ten times from $0.0063 in 1993 to $0.05000 in 2003. The huge varieties could be seen by benefits over the timeframe. The underlying profit was determined to be 14.6 percent of the net income; while the payout proportion had diminished by 9.6 percent in 2001. With a noteworthy decline in the organization’s deals for the year 2002; the payout proportion remained at 27.3 percent. With another expansion of $0.01; the payout proportion of the organization came to 33.1 percent in the year 2003.(Reeb, 2018)…………………………….

 

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