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Outline
Analysis of the general background
Ability to return cash: funding requirement analysis
Return cash or retain cash: Cost of retaining cash
How to distribute
General background
Basic description: Exhibit 1
1986: first IPO
1992 starting paying dividends: increasing the div by
about 0.01$ per share each year
2002: significant drop in sales: -47% in sales, - 54% in
profit
2003: an other increase in dividend to 33.1% of payout
ratio.
Funding requirements
Exhibit TN-1:
Both Net income in % sales and cash flow in % of sales
remains stable, even if the sales dropped by 47% in 2002
The pre-capital expenditure cash flow ranged from 4-19
times capital expenditures.
Large cash balance in 2003: 1.57billion or 16.2% of its
market value.
=> Linear is able to pay a dividend of 33% pre-investment
cash flow while still meeting its investment needs.
Table
Other determinants?market
conditions
Dividend policy changes
Early 1960s, most listed firms paid a div
1999, fewer than 2% firms initiate a div.
2002-03, div initiates again and increased slightly. (ex-9b)