Ranjit Thomas

Linn Energy: High Dividend, Low Valuation

The problem with LINE is that like a lot of other exploration companies, they generate no cash, pumping huge amounts into capex. The high dividend yield is illusory because it is funded by regular equity issuances - no different from a Ponzi scheme. Also, they were smart/lucky enough to hedge most of this year's production at high prices. As these hedges come off, they will be in deep trouble.