The Dividend Cushion has foretold another cut!

On July 30, along with second-quarter results, LINN Energy (LINE) announced it will recommend the suspension of payment of LINN Energy’s distribution and LinnCo’s dividend at the end of the third quarter of 2015 in order to save ~$450 million in cash from the annualized payouts. LINN Energy reported a net loss in both quarters thus far in 2015, and its yield was near 15%; simply unsustainable.

We’ve been warning our readers about the risks associated with LINN Energy and LinnCo (LNCO) and their high-yielding payouts for over two years now, as we did again earlier this month. We rated the entity’s distribution safety as VERY POOR, based on its Dividend Cushion ratio of -2, and the assessment couldn’t have been more accurate. Our opinion turned on the firm’s dividend in June 2013 when shares were trading near $30. Shares are now trading at ~$5.