Looking at 10Q for 3rd Q. Period: Nine months ended 09-30-08. Net income from continuing operations: ($62,397). Linn is only showing a profit because of the sale of assets. As to cash flow, eliminating the $161M gained on the asset sales and the total cash flow becomes negative. Using the figures for the recent nine month period; Linn cannot cover the dividend with cash from continuing operations. Now consider debt to share holder's equity is 87.8%.. Consider too the covenants in the company's new debt, the Senior Notes'. It limits the Company's ability to pay distributions on the Company's units. Could be a bummer. Also, take note that 67% of current assets are accounts receivable.
The Barron's article states "a fat dividend should be safe for some time, thanks to Linn's smart hedging of its oil and gas production."
Let's look at what the 10Q has to say......"During the nine months ended September 30, 2008, the Company cancelled (before the contract settlement date) derivative contracts on estimated future gas production resulting in realized losses of $81.4 million. The future gas production under the canceled contracts primarily related to properties in the Appalachian Basin and Verden areas." This was the property sold to pay debt!
I think that I'll pass on this dividend play. But if you are seeking a solid oil dividend look at BP currently yielding about 7%.