With 2012 just beginning, it's a great time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be better informed about whether you should buy it for your portfolio -- or sell it if you already own it.
Today, let's take a look at Linn Energy (Nasdaq: LINE). The oil-and-gas master-limited partnership locates most of its assets located in the mid-continent region and Texas, with additional holdings in Michigan and California. The stock stayed steady in 2011, recovering from dives in August and October to finish the year up 0.69%. Analysts are forecasting moderate growth in share price this year.
Forecasts for Linn Energy
| Median Target Stock Price | $44.00 |
|---|---|
| 2011 EPS Estimate | $1.82 |
| 2012 EPS Estimate | $2.22 |
| Expected Annual Earnings Growth, Next 5 Years | 5% |
| Forward P/E | 16.59 |
| CAPS Rating (out of 5) | ***** |
Source: Yahoo! Finance.
What will 2012 bring?
First and foremost, Linn Energy has new leadership. Company founder Michael Linn stepped down as Executive Chairman at the end of 2011, though he will continue to serve on the board as Director and Founder. President and CEO Mark Ellis will now serve as Chairman, increasing his responsibility for determining the future of the company.
Linn Energy is going full speed ahead in the Granite Wash in 2012. After closing a $530 million acquisition in the region, the company has identified 600 drilling locations. It plans to drill and operate 59 horizontal wells that will generate rates of return greater than 50%.
Linn has set its capital budget at $880 million, and though spending is targeted at its liquids-rich plays, the company has hedged 100% of natural gas production at $5.45 per thousand cubic feet through 2015 -- great news, given all the uncertainty about the future of natural gas prices.
Halfway through January, Linn announced a public offering of 17 million units priced at $35.95. The company expects to raise at least $586 million and plans to use the proceeds to pay down debt.
Foolish takeaway
Linn grew production by 30% in 2011; it wasn't enough to move the stock, but shareholders were rewarded with a 5% increase in the quarterly cash distribution. Production is expected to increase by 40% this year, possibly indicating another sizeable distribution increase, something investors will appreciate if the stock holds steady again in 2012. I'm confident enough in the company's growth plan to head over to CAPS and give it the green thumbs-up. The nice thing about CAPS is that I can paste my investment thesis into a CAPS pitch, allowing me to revisit my thoughts down the road.
Linn Energy is just another example of how investors can profit from dividends and unit payments. If you like Linn for your portfolio, consider checking out 11 more ideas with the Fool's special free report "Secure Your Future With 11 Rock-Solid Dividend Stocks."
