There is a pretty straightforward rule to every high-yield stock. If the dividend looks safe, then it’s likely a wise investment. And if the dividend appears poised for a cut, then you should head for the exits.

But what if the looming dividend cut is likely to be a lot smaller than the crowd is anticipating? Such stocks, counter-intuitively, are a great buying opportunity. The current dividend concerns surrounding upstream master limited partnership Linn Energy, LLC (Nasdaq: LINE) help paint the picture. (Upstream energy producers acquire existing oil and gas properties once they are already in production.)

Linn, in fact, is the nation’s largest upstream MLP, with a strong track record of generating cash flows from acquisitions well in excess of its purchase costs. Oil’s price slump means that the company’s future cash flows won’t be as robust as was expected just a few months ago — when West Texas crude traded for $100 a barrel.

Reflecting a more challenging environment in 2014, management recently trimmed the dividend to $2.90 a share, from last year’s $3.14 a share. The key question for investors: Can the company still support the current dividend? Considering its yield now stands close to 13%, the market suggests that Linn is poised to deliver bad news.

The math is fairly simple: How do future cash flows compare to the funds required to support the dividend? This is known as the coverage ratio. Analysts at Raymond James cycled through the company’s various moving parts and predict that the coverage ratio in 2016 will be 1.1, implying that the company will generate $1.10 in cash flow for every $1 needed to support the dividend.

#-ad_banner-#​These analysts note that Linn has rapidly transitioned from a company with major capital spending needs, to one with greatly reduced capital spending needs. They add that Linn has already secured contracts for around 60% of 2015 and 2016 oil output, at prices higher than the current spot rates. They figure that investors “underestimate LINN’s base cash flow business and the impact of its multi-year hedge book.”

This is a good time to note that half of Linn’s output is natural gas, one-third is oil and the rest is natural gas liquids. Notably, natural gas prices have been firming in recent weeks, even as this stock has cratered.

Still, the analysts at Raymond James may be too bullish in their cash flow outlook. Analysts at MLV Capital, for example, think that Linn will have a 2015 coverage ratio of just 0.91. They think that figure will drop to just 0.78 in the first quarter and rebound back toward 1.0 by year’s end.

Yet these analysts also note that Linn has ample excess liquidity, thanks to a credit line that is only half-drawn. Management won’t talk about the topic until Q4 results are released in early February, but Linn appears positioned to make up for the near-term shortfall in the coverage ratio by drawing down a bit more of its credit line. This means the dividend won’t necessarily need to be cut. As noted earlier, the analysts at Raymond James don’t even think it will come to that. (I encourage you to read the Q3 transcript to get a better sense of Linn’s impressive cost containment and asset base reconfiguration.)

But let’s assume that the analysts at MLV, predicting a poor coverage ratio in the first quarter of 2015, are correct. Let’s further assume that Linn needs to trim its dividend down to the level that reflects a 1-to-1 coverage ratio, in the context of MLV’s cash flow assumptions. If Linn can only support 91% of its current dividend in 2015, then its dividend will need to be cut around 10%, to around $2.60 a share. If that happens, what is now a 12.8% yielder becomes an 11.6% yielder.

And that’s where the upside for this stock comes in. Once investors grow comfortable with the fact that the dividend may need to be trimmed by around 10%, but not more aggressively, the payout will again be seen to be on firmer footing. Investors are likely to bid up shares to the point where the yield falls to 9% — the stock’s five-year average yield.

A 9% yield from a $2.60 a share dividend implies a move up to $28.89, more than 25% upside from current prices. Add in the fact that investors are gaining access to an 11.6% pro forma yield (after a possible 10% dividend reduction), and the total return for this stock approaches 40%.

Risks To Consider: The biggest risk is a further drop in oil prices or a pullback in natural gas prices. If those commodities are trading lower in early 2015 when management issues its 2015 dividend guidance, then investors may be looking at a $2.25 a share payout and not the $2.60 a share payout that this analysis suggests.

Action To Take –> The sharp pullback in shares over the past few months appears to anticipate an even more dire outcome for the dividend than is likely to happen. That’s why Linn Energy, though poised for a potential dividend reduction, is actually a buying opportunity at current levels.

If you’re looking for more high yields, then let High-Yield Investing be your trusted guide. We’d like to share with you a relatively unknown investment — we like to call them “Private Banks” and they yield up to 12%. Like a REIT, Private Banks are required by law to pay 90% of profits to shareholders. To learn more about the incredible power of these wealth-generating income investments, I invite you to watch this research video.