ACAS reached up in the 40's only to fall in a small death spiral down to the single digits... I remember back when I saw ACAS at $31. Things are a bit different with this beast, but it is scary to think things could get a lot worse. I'm glad I own puts under the puts I sold for this dec expiration. 30's sold, 29's bought. I wouldn't want to be naked here.
Uhhh no .... back in 2008 ACAS owned non-public/ non-liquid corporations and mezzanine debt. AGNC owns gov't backed mbs that is highly liquid (in fact the Fed is a big buyer of this same debt) and is trading below the book value of that same gov't guaranteed mbs.
Of course AGNC like any stock can trade up or down based on lots of factors --- including irrational fears, but AGNC has to be viewed as a relatively safe investment as long as it is trading below book value. Also realize that - as of today - that book value is augmented by CASH equal to the accumulated interest that has been earned this qtr on the aforementioned mbs and which will be payable (in the form of a cash dividend) to owners of the stock as of this month's ex-dividend date.
I'm predicting that mgmt will announce another $1.25 quarterly dividend this week ...
Why 1.25? I don't see net interest margins covering that distribution as of Q3. Do you think the sell off in MBS has improved NIM enough to cover the $1.25? I don't think the management would pay 1.25 again just because it needs to distribute excess gains. They don't like to pay out book value thus the cuts to a 1.25 dividend back in march from 1.40.
1. Maintain dividend for this quarter, cut to .70 next quarter.
2. Cut this quarter to 1, and maintain that as long as possible.
I'm hoping for 1 since I have a small number of calls, but I'm being realistic.
Core income is about .70 per share, and if you taken into consideration hedging losses the past 2 quarters, it's far lower. Comp income is nice, but I don't think management is going to cannibalize the company. They'll sell just enough to ride them over tough patches.
Why not eliminate the dividend altogether? That's easily maintainable; or do as some companies do whose core earnings are declining: only pay a dividend at year-end, after they have determined full-year earnings.