Dividend Policy At Linear Technology

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Xiaoling Tang FIN 46059 Summer2015 William Billik 08/04/2015 Dividend Policy at Linear Technology Linear Technology dividend policy is considered a dividend stability policy because of the approach in its allocation. Different from the residual and hybrid approaches, it involves paying dividends in quarters. The quarterly dividends are paid considering fractions of the yearly earnings. This approach is also good because it reduces the uncertainty that investors may have as it provides income for them. The revenue and the sales of the fiscal year of this company have increased over the years. Therefore, the company has had a steady increase in the percentage of dividends provided over the years. The company realized a good opportunity of…show more content…
The provision of dividends is always associated with several problems in the process. Paying dividends regularly can easily lead to unrealistic expectations among the shareholders. Any irregularity in a dividend provision policy might raise issues of discontent among the investors or parties dependent on it, which results in the pressure on the company to maintain the dividends, such as the Linear Technology; they will have to maintain their policy of increasing the dividend’s percentage. Therefore, a company’s bad or poor performance that might affect the dividends is easily realized by the investors, which is disadvantageous for business. Also, when the demands for dividends increase, cash flow for the company can be prevented. The chances of the company reinvesting profits in their future growth are also minimized in the process. This can strain the future payment of dividends easily if the company gets to face challenges. Like in the Linear company scenario, if they don’t interfere with the provision of dividends, they might be affected in the future. The ideas on providing dividends tend to vary when challenges come in; that is why the companies are always recommended to discuss and critically analyze their position before making such major decisions. Dividends also prove to be a blunt instrument for a reward. This is because dividends are rewarded to you regardless of whether you fully or partially depend on it. While it is non-discriminatory, the

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