Thursday, January 14, 2010

Linear Technology: Buy The Rumor Sell The News

After the market close on Tuesday, Linear Technology (LLTC) reported better than expected earnings for the company's second quarter ending 12/31/2009: 33 cents per share versus an estimate 30 cents per share. On Wednesday the stock proceeded to trade down 1.2% to $29.87 with pretty good volume on the positive earnings news.

In the company's earnings release, they also announced a 4.5% increase in the quarterly dividend to 23 cents per share versus 22 cents per share in the same period last year. The company has increased its dividend each year since it first began paying one in 1992. The projected payout ratio using an average of the June 2010 year end earnings estimate ($1.24) and the June 2011 earnings estimate ($1.51) is 67%. The payout ratio trend continues to move higher with the 5-year average payout ratio equaling about 43%. The company does maintain an S&P Earnings & Dividend Quality Ranking of A-.

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