Linear Technology designs and manufacturers high end linear chips which monitor, amplify or transform continuous analog signals associated with real world phenomena (temperature, pressure, weight, position, light, sound and speed) and markets them in over 4,700 products. The company has grown profits and dividends between 8-22% annually over the past 10 years earning in excess of a 20% return on equity. LLTC has experienced considerable earnings volatility of late; however, long term, it should be able to resume earnings growth because:
(1) it is broadening its product base to take advantage of infrastructure build out and the trend toward energy efficiency in industrial applications,
(2) continuing high level of investment in R&D,
(3) gains in market share,
(4) increased prices,
(5) an aggressive cost control effort.
(1) the consumer segment of its business is weak due to low consumer confidence,
(2) a leveraged balance sheet.
LLTC is rated B++ by Value Line, has over 50% debt to equity ratio and its stock yields 3.0%.
Stock Dividend Payout # Increases
Yield Growth Rate Ratio Since 2003
LLTC 3.0% 5% 57% 10
Ind Ave 3.3 8* 55 NA
Debt/ Return EPS Down Net Value Line
Equity on Equity Since 2003 Margin Rating
LLTC 50% 21% 3 32% B++
Ind Ave 11 14 NA 16 NA
*most companies in LLTC’s industry don’t pay a dividend
Note: LLTC stock made good progress off its March 2009 low, quickly surpassing the downtrend off its May 2008 high (red line) and the November 2008 trading high (green line). Long term, the stock is in a trading range (straight blue line is the lower boundary). Intermediate term, it is in an uptrend (purple lines). Short term, it is in an uptrend (brown lines). The wiggly blue line is on balance volume. The Dividend Growth Portfolio owns an 85% position in LLTC. The upper boundary of its Buy Value Range is $17; the lower boundary of its Sell Half Range is $80.