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Analyst Blog

Recently, Linear Technology Corp. (LLTC - Analyst Report), a leading provider of low-power wireless sensor network (WSN) technology, announced its decision to raise its quarterly dividend by 1 cent to 26 cents per share.

Additionally, the board also consented to the payment of the current quarter dividend in December, ahead of the customary February timeframe, keeping in mind the interest of the shareholders. Consequently, the increased dividend will be paid on December 28, 2012 to stockholders of record as of December 17, 2012.

The 4% increase in dividend is encouraging and should support share prices in the sluggish market. Given its size and scale of operations, Linear generates steady cash flows and therefore investors are welcoming the returns.

During the recently concluded first quarter of 2013, Linear spent $5.1 million on share repurchases and $58.8 million on dividends. The cash and short-term investments balance was $1.32 billion at quarter-end, increasing $116.9 million during the quarter.

Dividend hikes are a good way of encouraging investor confidence as they return shareholder value. We remain encouraged by Linear’s strong cash position. Linear has been paying dividend since 1992 and has increased it every year since then. The current dividend yield is approximately 3%. We believe that continuous hikes in dividend will inspire investor loyalty through higher returns from the stock.

Linear reported decent first quarter results with both earnings and revenue increasing sequentially. We think that Linear’s business is well-diversified among core markets and the company would generate good results as the economy continues to improve.

The weak second quarter guidance sent estimates plunging, which also had the Zacks Consensus Estimate for the fiscal years 2013 and 2014 dropping significantly. As a result, Linear has a Zacks Rank #5 (Strong Sell). We note that its archrivals, Texas Instruments (TXN - Analyst Report), Maxim Integrated Products, Inc. (MXIM - Analyst Report) and Analog Devices (ADI - Analyst Report) carry a Zacks Rank #3 (Hold).

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