LINN Energy’s stock performance and volatility


Oct. 1 2014, Updated 11:58 a.m. ET

Seven-year stock snapshot

A look at LINN Energy’s (LINE) stock performance over the last seven years isn’t encouraging.

An investor who bought the stock for just over $30 in late September 2007 and put it away will be disappointed to see it trade at about the same level today.

However, investors should note that the starting and ending point of a stocks return’s analysis can significantly change return performance. This is because various developments can cause stock prices to fluctuate wildly in very short periods of time.

Stock performance

During this seven-year period, LINE’s stock fluctuated wildly—compared to its larger energy industry peer, ExxonMobil (XOM).

This is even more evident when we compare its movements to the Energy Select Sector SPDR ETF (XLE). XLE tracks a diversified basket of energy stocks. The even more diversified SPDR S&P 500 ETF Trust (SPY) represents the broad U.S. equity market.

Exchange-traded funds (or ETFs) are a great way to gain low cost diversified exposure to various broad market sectors. Check out our series explaining ETF investing here.

For the most part between 2010 and 2013, LINE outperformed XOM and the broader indices.

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This changed in early July 2013. It crashed ~32% in just a couple of days. The decrease came after news that it was under investigation by the U.S. Securities and Exchange Commission (or SEC), along with its affiliate LinnCo LLC (LNCO). The investigation was related to the acquisition of Berry Petroleum and other financial issues. They announced this acquisition earlier.

Since then, the stock has underperformed.

Don’t judge a book by its cover

The old idiom holds true for LINE. It’s a heavy dividend paying company.

LINE hasn’t missed a distribution in the last seven years. However, it also ensured that these distributions only move in one direction—up.

Currently, it pays a monthly distribution of $0.24. It trades at a yield of just under 10%!

Following its cash generating asset acquisitions from XOM, some analysts are expecting another bump in LINE’s distributions soon.

The effect of these regular and bountiful dividends can be seen in the chart above. It compares “total returns” for all the companies and exchange-traded funds (or ETFs) that we only compared stock price returns for earlier.

Total returns include all sources of benefits to shareholders—including dividends.



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