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American Capital Agency Corp. Message Board

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  • xxavatarxx xxavatarxx Jan 7, 2013 4:34 PM Flag

    AGNCP - What are the disadvantages?

    You are more or less guaranteed 8% until it's callable in 2017.
    If the #$%$ hits the fan, the board of directors can stop the dividend, in which case your preferred stock would probably go down to a few dollars in value.
    If you want an example, go look at the chart for the national bank of greeces preferred stock using this tikcer on Google -- NBG-A
    It stopped paying it's dividend.
    This is the risk with preferred stock. When things go bad, it's a big BUST.

    Preferred stock has higher dividend priority than the normal AGNC stock.
    So if AGNC's divi gets cut, AGNCP's will just keep getting payed at the normal rate.
    They can't cut it, and have to pay it out unless they cancel the dividend.

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    • AGNCP looks pretty good to me. The price at close $25.89 gives you a 7.72% yield. A new Prefered issue can not be called before 5 years. Three dividends have been paid so at least 17 more for sure. If rising interest rates it might not be called. It is "Cummulative" if the BOD fails to pay a Dividend on AGNCP it has to be paid with interest at a later time. They cant declare a common Dividend if money owed on a"Commulative" Preferred share. The only way to lose its PPS would go down with rising interest. AGNC doing a BK would be the only chance of a loss of Parr or due Dividends and Interest. I plan to put this on my watchlist.

    • When they call it, do you get $25/share or do you get the market price?

      Also, If AGNCP cuts it's DIV then AGNC's DIV=0 which means they are making zero, since they have to pay out 95%

      • 1 Reply to mikeinfwtx
      • You get par value which is always $25 for preferred stock ... just the way the industry does it. Also, there is more than one kind of preferred stock. I don't own this one, but some preferred pays a cumulative dividend; that is, if they miss some payments, they catch up on them before paying any common divies. Some preferred pay a non-cumulative dividend; that is, each quarter is looked at on its own ... there is no catch up required. Oh, and just because it is callable by the company doesn't mean it will be. Preferred has a longer duration - which varies between them - at which point it will be redeemed at par if it's still out there. The call feature is optional at the company's discretion.

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