Case | HBS Case Collection | October 2003 (Revised February 2004)

Dividend Policy at Linear Technology

by Malcolm P. Baker and Alison Berkley Wagonfeld

Abstract

In 1992, Linear Technology, a designer and manufacturer of analog semiconductors, initiated a dividend. The firm increased its dividend by approximately $0.01 per share each year thereafter. In fiscal year 2002, Linear experienced its first significant drop in sales since its 1986 initial public offering. Sales dropped by 47%, and profits fell by 54%. In the spring of 2003, CFO Paul Coghlan is deciding whether to recommend yet another increase in dividends to lift Linear's payout ratio to 33.1%, high by the standards of technology firms.

Keywords: Financial Strategy; Investment Return; Financial Condition; Taxation; Initial Public Offering; Financial Management; Semiconductor Industry;

Citation:

Baker, Malcolm P., and Alison Berkley Wagonfeld. "Dividend Policy at Linear Technology." Harvard Business School Case 204-066, October 2003. (Revised February 2004.)