Register to read the introduction…
Linear Technology initially planned to begin with a relatively low dividend of $0.05 per share which amounted to a 15% earnings payout ratio – mindful of the fact that investors abhorred firms that reduced or stopped their dividend payment schedule. Beginning more conservatively than their original estimates, Linear Technology began with a $0.00625 dividend per share. Linear Technology has steadily increased it’s dividend per share increasing the payout approximately every four quarters by $0.00125. This pattern was maintained from Q2 1993 to Q3 2000. Beginning in Q4 2000, Linear Technology began increasing its dividend per share by a new pattern of $0.01 increases per four quarters. The current dividend per share is $0.05 during Q3 2003. Its current dividend yield of 1% is relatively higher than the average dividend yield rate for Information Technology firms in the S&P 500, around
…show more content…
One main reason for dividend policy is based on the manager’s belief that investors prefer stable dividends with sustained growth. This kind of dividend signals to the investor the firm has reached a steady state growth i.e. a mature market position. A company usually only begins to consider releasing dividends once it has established regular and predictable operations cash flows. However, dividends can also act as a negative signal telling investors that the firm’s growth rate is slowing. Increasing the dividend can, on one hand, signal the manager’s perspective for future growth and optimism over future cash flows; on the other hand, increasing the dividend can also signal a lack of investment opportunities. The use of dividend payouts has steadily decreased over the last 30 years. This trend is in part related to the changes in dividend tax rate, however, I believe the majority of this trend or trends can be attributed to changes in investor preferences. The dividend payout decision is ultimately chosen by a manager, whose main objective is to satisfy shareholder
One main reason for dividend policy is based on the manager’s belief that investors prefer stable dividends with sustained growth. This kind of dividend signals to the investor the firm has reached a steady state growth i.e. a mature market position. A company usually only begins to consider releasing dividends once it has established regular and predictable operations cash flows. However, dividends can also act as a negative signal telling investors that the firm’s growth rate is slowing. Increasing the dividend can, on one hand, signal the manager’s perspective for future growth and optimism over future cash flows; on the other hand, increasing the dividend can also signal a lack of investment opportunities. The use of dividend payouts has steadily decreased over the last 30 years. This trend is in part related to the changes in dividend tax rate, however, I believe the majority of this trend or trends can be attributed to changes in investor preferences. The dividend payout decision is ultimately chosen by a manager, whose main objective is to satisfy shareholder