Friday, April 25, 2014

A Double-Digit Yield Isn’t Everything

This article was originally published by GuruFocus on April 19, 2014

By Sarfaraz A. Khan. Research Assistant: Gohar Yousuf
Linn Energy (LINE) has faced several analyst downgrades following the release of its quarterly results and annual guidance. The company is eying more than 30% growth in 2014, but in terms of production-per-unit, its output will decline. Moreover, the company has also targeted a tight distribution coverage ratio of 1.00x.

As a result, the units of Linn Energy, and its affiliate LinnCo (LNCO) have struggled; both have fallen by more than 10% since the day of the earnings release. However, an asset deal related to its Midland acreage could result in an upside. Moreover, the company, which is one of the largest upstream master limited partnerships in terms of enterprise value, gives a juicy double-digit yield.

For these reasons, although Linn Energy looks attractive for dividend hunters, others might consider looking into Linn’s peers with better near term growth prospects and a higher coverage ratio.

Quarterly Results

In the previous quarter Linn Energy increased its production by 11% from last year to 889 million cubic feet equivalents per day, or MMcfe/d, with Berry Petroleum contributing 44 MMcfe/d. Excluding the positive impact of Berry Petroleum, Linn Energy could only manage to grow .. read full article at GuruFocus.