Dividends and Returns: Linn Energy and Annaly Capital - Revisited
Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Progress Report: Linn Energy (NASDAQ: LINE), mentioned February 3, is up over 11% since the infamous post, which spawned several scathing comments. Annaly Capital Management (NYSE: NLY), mentioned in the same post, is down almost 10% from that dubious moment in blogging history.
Since nobody else will, it seems I have to, and believe me I am anything but a self-promoting horn-blower. That being declared, I feel it is necessary to bust out the company pom-poms (mustard is such an odd color, so I prefer to consider it gold), and give the excellent executive management team at Linn Energy a resounding round of applause for not making me look like more of an idiot than I currently achieve on a daily basis. I don’t scour over my posts and keep up with the mentions like I should, but at some point when my returns allow me to hire a staff, that will be first priority. It’s much easier to perform that arduous task when I actually own some of the mentions in one of my many portfolios, so I felt the urge to revisit the post that generated such a well-deserved amount of anonymous venom.
Linn Energy is a couple bucks above their 200-day moving average, close to 52-week highs which it recently enjoyed ($34-$42). The company pays loyal shareholders $2.90 per share each year, well above its peers, making for a ridiculously robust 7.2% dividend yield. With a payout ratio hovering around 60%, it’s quite possible we haven’t seen the last of dividend increases. Linn’s daily average production increased over 75% from the second quarter, with operating expenses reduced by over 25% from lease-related outputs from 2011. The company reports third quarter earnings results Thursday, October 25 (11:00am EDT), and will provide an outlook for the remainder of the year.
The management team at Annaly should be applauded, as well, since the company recently announced a board-approved share buyback of some $1.5 billion over the next year. This announcement should bode well for investors, as it potentially ensures the safety of the nearly 13% dividend yield ($2.00 per share annually). The move may also offset any negative impact “QE-infinity” might have with this REIT, and we could see other REITs follow suit. Also of note, immediately following word of the buyback, research firm Compass Point upgraded Annaly from “Neutral” to “Buy.” Annaly reports Monday, October 29, and don’t be surprised if the buyback presents an opportunity to increase the dividend in the near future.
Success is such a fleeting occurrence at times when it comes to investing, and I am by no means anywhere close to calling them all correctly (Baidu, Ford, Chesapeake, oh my). And I don’t have anywhere near the amount of capital as the “big boys” who pay themselves by managing “other people’s money.” But when I read and listen to a lot of the “pundits,” I am curious how people can so willingly hand over their hard-earned dollars to an outfit that would recommend Facebook. If you have neither the time nor patience to take a look at a balance sheet or join me on the conference calls, I understand. But if you are growing more and more frustrated at either your own efforts or if you are kicking yourselves for following someone with the pin-point precision of a shopping cart’s wheel alignment, maybe it’s time to step back and do some evaluating.
Both of these companies reward investors with substantial dividend payouts and in times of economic and political uncertainty, those quarterly infusions provide a warm security blanket for us “little guys.” And judging from recent activities, it looks as though returns may be in store for these two, as well. Either way, we get paid for our patience. If you are spending more time getting ready for work each day, or figuring out your fantasy football starting lineup, than you are with your investments, perhaps it’s time for a little respite from those activities and dedicating a few more minutes in the day to something much more satiating than beating your co-workers with your virtual football team every Sunday. If you’re experiencing some less-than-favorable results from your current holdings, these offer potential positive upside, with palpable dividends along the way.
Motley Fool blogger Kyle Metivier owns shares of Linn Energy. The Motley Fool owns shares of Annaly Capital Management. 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.If you have questions about this post or the Fool’s blog network, click here for information.