LinnCo LLC

LinnCo LLC (NASDAQ: LNCO), as described on its website, “is a limited liability company (LLC) created to enhance LINN Energy’s (NASDAQ: LINE) ability to raise additional equity capital to execute on its acquisition and growth strategy. LinnCo’s sole purpose is to own LINN units and has no assets or operations other than those related to LNCO’s interest in LINN. As a result, LNCO’s financial condition and results of operations depend entirely upon the performance of LINN.”

LinnCo LLC was formed in 2012.  The primary difference is that LNCO shareholders receive a Form 1099 and LINE shareholders receive a Schedule K-1.  Retirement accounts have IRS limits for “unrelated business income.”  LinnCo is a way for persons to invest in Linn Energy without risking potential tax consequences for exceeding the UBI limits. It is for this purpose that I hold shares of LNCO in my retirement account.

Those considering a purchase of LinnCo LLC shares will need to evaluate the operations of Linn Energy. LINE's mission is “to acquire, develop and maximize cash flow from a growing portfolio of long-life oil and natural gas assets." 

LINE operates primarily in the Mid-Continent, Permian Basin, Hugoton Basin, Rockies, Michigan and California.  LINE’s strategy, described on the company website, has these key elements: (1) grow through acquisitions of long-life, high-quality U.S. assets; (2) organically grow reserves and production; and (3) reduce cash flow volatility through hedging

Linn Energy is one of the top 15 independent U.S. exploration and production energy companies. Linn Energy became the first publicly traded independent oil and natural gas limited liability company (LLC) in January, 2006. The company consistently has paid a quarterly distribution to its unitholders:  

$1.14 in 2006

$2.18 in 2007

$2.52 in 2008

$2.52 in 2009

$2.55 in 2010

$2.70 in 2011

$2.865 in 2012.

The last distribution increase was in May, 2012, when the distribution was raised from $.69 per unit to $.725 per unit, for an annual rate of $2.90.  At a December 26 closing price of $36.05, LINE’s yield is 8.0%.  LNCO’s distributions will basically track LINE distributions. The initial distribution for LNCO was set at $.71 per quarter, for an annual rate of $2.84.  At a December 26 closing price of $36.51, LNCO’s yield is 7.78%.

I believe either LINE or LNCO are worth considering for a dividend portfolio. I owned shares of LINE in a retirement account and sold LINE to purchase shares of LNCO. I would consider buying more LNCO at or below $35, and I would consider selling some shares of LNCO at or above $47.06. Do your own study and due diligence.  Form your own judgment. This is not a recommendation to buy but rather a suggestion for a stock (or in this case, stocks) to study.