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American Capital Agency Corp. Message Board

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  • instantwinbutton instantwinbutton Nov 8, 2012 12:22 PM Flag

    Dividend Cut and Fiscal Cliff !

    No. The dividend will be cut to 0.70 per quarter. 9% yield based on the current price per share of $31. It will be cut for Q1 distribution. I guarantee it. The price per share will trade down to $27 to compensate. Thats when management will buy shares back. The yield will be 10.4% at $27.

    Sentiment: Strong Sell

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    • instantwinbutton, their taxable income came in at 1.32 in Q3.
      Where are you seeing that taking a 30% - 40% hit for quarter 4 on taxable income which would explain a dividend of .70.

      It's pretty certain at some point in time a dividend cut will come.
      But you have to keep in mind they have 1.52 in undistributed gains and 2.8 Billion in unrealized gains on their MBS.
      Between those two things, they can sustain a decent dividend for some time just by diping into their undistributed and selling a little MBS each quarter and taking the unrealized gains on the sale.

      Also keep in mind they added to their undistributed gains again in Q3.
      They haven't had to dip into that yet. ; )

 
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