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American Capital Mortgage Investment Corp. Message Board

  • oldschoolbuilder oldschoolbuilder Mar 28, 2013 10:44 AM Flag

    Dividend boost coming?

    MTGE may be poised for a higher quarterly dividend based on the following:

    The very large secondary completed in mid-Feb was timed well in that agency MBS spreads had widened out a decent amount at the time. Plus the dollar roll market opportunity juiced those returns even more. CPRs in the single digits means very little premium amortization expense so we're looking at nicely higher earnings in 2Q and beyond (1Q may be a bit noisy) after incorporating a full quarter of invested secondary proceeds. With significant undistributed taxable income even post the secondary MTGE has some flexibility in boosting its payout given higher earnings.

    BV should be ok as well. Non-agency prices have rallied further this quarter with middle-to-upper stacks of legacy Alt-A paper up 5%+ during the quarter. Agency MBS have rallied recently after a sharp initial decline in Jan/Feb so overall BV should be about flattish I think (given the proceeds of the secondary are likely in a gain position currently).

    MTGE at roughly 1X BV still trades at a discount to other hybrid MREITS and carries a much higher dividend, which also has some further upside potential. Looks pretty good to me.

    Sentiment: Strong Buy

12.81+0.19(+1.51%)Feb 12 4:00 PMEST