There seems to be some concern that AGNC's stock price will drop if the dividend is cut. I don't necessary see that this is an automatic conclusion to draw as even if AGNC's dividend is cut the stock will still be a desirable investment relative to its competition. It would seem to me that people rotate out of an investment when they see other investments that would perform better. Do such alternative investments exist?
So my question is: What happened to AGNC's stock price the last time they reduced their dividend? I don't know how to find this out.
The only reason that more money is flowing into the stock market is because bond returns are dismal and bond investors are fleeing bonds. This could cause an inflation of stock prices independent of economic performance simply because the stock market gets over crowded. So with that in mind some people may leave dividend stocks to chase momentum stocks. But any impact due to this is independent of whether the dividend gets cut. If momentum chasers leave dividend stocks to play a temporary market up turn then it will happen whether the dividend gets cut or not.
"So my question is: What happened to AGNC's stock price the last time they reduced their dividend? I don't know how to find this out."
Go to AGNC's website under Investor relations/common stock dividends. It gives you the historical information there. I will help...Feb 6th, 2012 was the declaration of the dividend cut. Then look back on Yahoo's "historical prices" on the left side of Yahoo's page for AGNC's historical prices, keep clicking "next" until you come to Feb 6th, 2012 and Voila.
When one considers alternatives, one has to consider risk, not just momentary return. That's really what the yield is: how much return do you need to get to let AGNC use your money? That used to be over 20%, and it's much less now, but it's higher than it was not long ago. There are investments that pay 12% ... pretty easy to find ... and apparently people find these less risky than AGNC, or they would have a higher yield. Whether you buy AGNC or PSEC, for example, partially depends on your risk tolerance. So, I would not assume that AGNC won't go down because there is nothing better available ... that is your judgment only ... others will feel differently.
The last time AGNC cut it divy, the stock went up, apparently because the cut wasn't as much as people feared. I would not count on that happening again ... it might, it might not ... that's why we have a market.
One of the reasons that AGNC's stock price remained low enough to offer 20% yields is because it took a while for investors to trust their money in an mREIT investment after the subprime crisis. When I first started telling people that i was investing in mREITs a few years back their first remarks of caution usually had the word subprime in their somewhere. Even today many people are clueless that the popular mREITs that people are investing in today have no subprime in them thus the sector is still being shunned for a negative association that is not applicable anymore. Because of this I believe that today's stock price reflects more of a perceived risk than an actual risk as the demand for mREITs is lower than it would be if investors were not still spooked by the subprime history of mREITs. That is a good thing.
"an inflation of stock prices independent of economic performance simply because the stock market gets over crowded"
That rings true with indexes, but may not with individual issues. It will depend on where the float would come from to supply that demand increase. Examples would be from shares approved by shareholders for issue but not currently outstanding, employee/executive option(s) exercised (such as shares registered to an ESOP), or warrants.