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American Capital Agency Corp. Message Board

  • fmjtfb fmjtfb Sep 14, 2011 3:50 AM Flag

    payout ratio

    Fairly new to AGNC & REITs.
    As it appears AGNC has not been paying out 90% of earnings over the past 4 qtrs doe this mean they will have to experience a decrease in earning or increase the Divds in the next several Qtrs to meet the 90% requirment.
    Anyone know how long they have to adjust to the 90%?

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    • It's just personal priorities. You'll take it all now as it comes regardless of the future, some are willing to defer to keep the dividend consistent. Being consistent had it's dividends too. :)

    • yourbestfriendintheworld yourbestfriendintheworld Sep 14, 2011 2:56 PM Flag

      I'd rather they paid the div out to avoid paying any of that tax, then used the SPO to make up the small difference in their cushion.

      Just an efficiency thing. It's a small trickle of profit going out the door that should be kept.

      I don't know what effect a wobbly dividend would have on the stock price, though. It could induce an oscillation as stock players guess and bail as it varies. So at least there's some imagined stability insured by this leakage.

    • wintersfamily0793 Sep 14, 2011 2:27 PM Flag


      $1.36 per share of net income
      $1.41 per share, excluding $0.05 per share of other investment related losses
      $1.56 per share of taxable income(1)
      $1.40 per share second quarter dividend
      $0.44 per share of undistributed taxable income as of June 30, 2011 Increased $0.02, or 5%, from $0.42 per share as of March 31, 2011
      $26.76 book value per share as of June 30, 2011
      Increased $0.80, or 3%, from $25.96 per share as of March 31, 2011
      19% annualized return on average stockholders' equity ("ROE") for the quarter(2)

    • Well I guess they could use it, after taxes, for "General corporate expenses". You know, like higher salaries and bonuses. Nah, they would never try that, they know "we" are watching their every move...

      The corporate secretary is a Mr.Samuel A. FLAX. What would he get if he spent our reserve fund?

    • wintersfamily0793 Sep 14, 2011 9:23 AM Flag

      It doesn't mean anything, an MREIT can pay out what they want, but if they retain "undistributed earnings" based on REIT taxable income, they must pay a 4% excise tax on the dollars....AGNC has 44 cents as of 6/30/11 in "undistributed earnings" that they have or will have to pay excise tax on....

      • 4 Replies to wintersfamily0793
      • Don't assume that undistributed taxable income at the end of the taxable year will be subject to reit-level tax.

        A reit has (effectively) until the due date (including extensions) of their tax return to finish paying out the prior year's taxable income.

        To illustrate, assume a brand new reit in 2011. Taxable income for 2011 is 2.00 per share. During 2011 it pays out 1.60 so as of 12/31/11 there is 40 cents of undistributed taxable income.

        Assume the first quarterly dividend of 2012 is 50 cents. This dividend "carries out" 40 cents of 2011 undistributed income and 10 cents of 2012 income.

        Next assume 2012 taxable income is 3.00 and the last 3 quarters of 2012 dividends total 1.80. At the end of 2012 undistributed taxable income is 1.10 (3.00 - 1.90).

        As long as 1.10 is paid out prior to 10/15/13, there is no tax on 2012 income.

        Put another way, dividends paid thru 10/15 of the following year carry out taxable income on a FIFO basis.

      • No response to my previously posted question?

      • Do you have a link to that info? I was under the impression that any taxable retained earnings over the 10% threshold was subject to the 35% corporation tax.

        I'm not sure, a CPA could likely answer this, but I wouldn't think they would have to pay taxes on the retained earnings from last year (they paid the taxes on that), only additional retained income for this fiscal year.

      • good point, Winter, then does this mean that AGNC may up the
        divi in the next quarter to compensate for the 44 cents?
        what do you see them doing regarding the 4% tax issue?

    • Are you looking at GAAP earning or Taxable Income? The 90% is based upon their Taxable Income. Taxable Income and GAAp income can vary significantly.

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