Why LINN Energy's Shares Jumped
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Both LinnCo and LINN Energy jumped 10% today on a positive analyst report.
So what: Analysts at Bank of America Merrill Lynch released a report that said they don't think LINN Energy has inflated or distorted cash flow because of accounting practices. The company has been under pressure after Barron's and research firm Hedgeye Risk Management questioned the practice of capitalizing put contracts, which affect non-GAAP metrics and potentially the dividends the company pays.
Now what: This doesn't affect the informal investigation by the SEC, but it may give investors a little confidence that the company will be able to maintain its dividend. LINN Energy's 13.1% dividend yield and LinnCo's 11.6% yield both are big reasons why investors buy the companies' stocks, so if those payouts are in question it could be a huge hit. I don't see today's revelations as a sign to buy but they should help make long-term investors a little more comfortable with their dividends, because those don't appear to be in question just yet.
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The article Why LINN Energy's Shares Jumped originally appeared on Fool.com.Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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