"The dividend is covered by EPS, which constitute core earnings. That is what is appealing about HTS and why the market is willing to pay up for a lower yield."
I agree. I believe AGNC relies more heavily on non-core earnings to cover the dividend, which is at least part of the reason it has a higher yield. Whether or not the perception of a riskier dividend is justified is a question best left to each individual investor, obviously. But I like AGNC's management team.
As for HTS, I did a bit of similar analysis and drew similar conclusions this past April. My only reservation is that I am not as familiar with the HTS portfolio. I have a fair idea how the macro environment could impact AGNC, but HTS involves a little more guesswork for me.
It will be interesting to see what happens in the 2nd & 3rd quarters this year. Lots of factors coming into play.
I don't hold these shares; I trade calls in them. Okay, I buy some shares in my IRA's. I appreciate the fundamental views on EPS, spreads, etc., but actually, I just don't care in as far as others might. I just want someone to buy this dividend, and AGNC is not going to get me where I want to be at this point. So who might be the best pair trade; I just think HTS, but am ready to be wrong. I am up already.
If it gets me a $1.00 to $1.50 run from $29.00 and holds true to form, then I will be seeing $30.50, and I will sell all then. If I get to $30.25, I might do the same. I just want to make some profits.
I would never suggest to substitute HTS for AGNC as a core holding, but if i were inclined to hold some shares long them three months, I might consider HTs with further analysis.
I'm not long shares in either AGNC or HTS right now. I just tried to look at projecting HTS's dividend going forward to get a feel for the dividend run. Don't want to get caught by a lower dividend announcement.
I could have dug deep enough to get more comfortable and eliminate some of the guess work, but I decided it probably wasn't worth all that effort. I think most signs point to $1 dividend and I'm willing to bet on that.