Linear Technologies
TO: Board of Directors, Linear Technologies
FROM: Mr. Paul Coghlan CFO, Linear Technologies
RE: Dividend Policy
Summary:
Based on the financials to date and the forward looking capital investments required Linear should increase their dividend payout by $0.01 per share.
Entering the fourth quarter of 2003 the market seems to show continued signs of improvement. The company has shown steady growth and revenues are forecasted to exceed 2002’s by 19%. The forecast shows net income coming in at $222.7m; a robust 12% increase over last year. Linear has however increased its cash holdings to be in excess of $1.5b through various management initiatives. However this $1.5b has only shown investors a 4.25% growth which translates to $0.10 earnings per share pre-tax. This is in line with the company’s history of conservatism. Looking ahead the company does seem to have requirements to build a new fabrication facility as their facility is aging and is nearing its effective use in its life cycle and will cost around $200m. Linear seems to have enough cash on hand to be able to invest their cash without leveraging the company too much in the future. They have also not spent much on capital expenditures as a percentage of sales (2.2% in FY2002) this last year and should look to increase that in the future.
By looking at the information above in the table we see that Linear has had a long history of paying a dividend and has ample resources to pay out dividends; Thus making them one of the highest in their industry as noted in the table below. The other options show extremes in the industry and prove to be too “far out there” in terms of this industry. Technology companies are known for investing their cash in R&D as well and Linear needs to be aggressive in using its cash reserves in a higher and better use that will in turn show investors more returns as well as provide a health dividend amongst their peers.
This is in line with what
FROM: Mr. Paul Coghlan CFO, Linear Technologies
RE: Dividend Policy
Summary:
Based on the financials to date and the forward looking capital investments required Linear should increase their dividend payout by $0.01 per share.
Entering the fourth quarter of 2003 the market seems to show continued signs of improvement. The company has shown steady growth and revenues are forecasted to exceed 2002’s by 19%. The forecast shows net income coming in at $222.7m; a robust 12% increase over last year. Linear has however increased its cash holdings to be in excess of $1.5b through various management initiatives. However this $1.5b has only shown investors a 4.25% growth which translates to $0.10 earnings per share pre-tax. This is in line with the company’s history of conservatism. Looking ahead the company does seem to have requirements to build a new fabrication facility as their facility is aging and is nearing its effective use in its life cycle and will cost around $200m. Linear seems to have enough cash on hand to be able to invest their cash without leveraging the company too much in the future. They have also not spent much on capital expenditures as a percentage of sales (2.2% in FY2002) this last year and should look to increase that in the future.
By looking at the information above in the table we see that Linear has had a long history of paying a dividend and has ample resources to pay out dividends; Thus making them one of the highest in their industry as noted in the table below. The other options show extremes in the industry and prove to be too “far out there” in terms of this industry. Technology companies are known for investing their cash in R&D as well and Linear needs to be aggressive in using its cash reserves in a higher and better use that will in turn show investors more returns as well as provide a health dividend amongst their peers.
This is in line with what