Question for the AGNC experts on the dividend level staying at the $1.25 level.
There seems to be a split on whether they keep the $1.25 or lower it by 10% - i was wondering the thoughts of people on this board who have followed this company and management over the years?
There seems to been a couple of things over the last month and half that point to either.
On the side of a dividend reduction: 1 issued 58m shares about a month before the dividend - not sure this was ever done before & the timing seems odd. 2 they did not mention the dividend as part of the issuance - if they had stated the dividend would be $1.25, i think they could have received an additional 30, 40 or 50 more cents/share. 3. At $1.25, the dividend for new shares will be about $72m - if they reduce the dividend by 15 cents, it brings this down to about $64m and, with the savings on the pre-issuance stock of about $53m (350x15), the net cost of the dividend on the 58m shares would be only $11m.
On the side of maintaining the dividend: 1 AGNC does have over $2/share of undistributed income, but i am sure how quickly they need to pay this out. 2.On the Feb conference call, the CEO stated a corporate desire to keeping the dividend at stable level. 3.CEO 3 weeks ago did purchase about 50,000 shares and i assume his intend was not just to garner support for the stock until the SPO (may be naive on that one). 4 (the most important) - this management has had an excellent track record and has been upfront and honest with the shareholders - i would expect them to continue that approach with the next dividend.
I think some (if not many) of the shareholders were upset with the timing of the SPO and felt they got somewhat screwed on that deal. I would hope that this management would not make another decision that would again make most of the shareholders feel they got screwed again.
I would ask the opinion of those who know this company and management best for their thoughts. Thanks
For many of the same reasons mentioned already, I believe a dividend reduction to be very unlikely. Total taxable income remaining at the end of the fourth quarter of 2012 was quite sufficient to pay $1.25 on both existing and the newly issued shares for the first quarter. If most of the new money was used for TBA's, which quickly generate taxable income, I was thinking that there would be some pressure to slightly increase the dividend. If the dividend remains unchanged at $1.25, AGNC could easily have over $5 per share of undistributed, taxable income at the end of 2013.
not an expert on AGNC by any means, but....
1. the offering took some of the earnings overhang, assuming that the new shares will qualify for the dividend.
2. a reduction will certainly hit the share price somewhat
3. after such a reduction, the share price will recover somewhat, as the reduction reaction will certainly be overdone.
4. i bailed last september, and am waiting for the announcement. it will either stay the same or be reduced. once some certainty is achieved, that will be the time to buy.
Thanks wizard. I think some people are naive to think that if they reduce this to an annual dividend of $4 that it is going to be $32/share stock - that's a 12.5% return. I tend to think, at worst, we go to $4.40/annual; even at that, the yield would 13.75% at a $32 price. If people thought this stock should be yielding 12.5% for today's risk, it would be selling at $40 today.
Look at ARR - before the last 2 dividends, the price hit $7, this quarter it doesn't look like it will even hit $6.80 and it's all because most believe they will again cut their dividend next quarter.
Like many places in the market there is no end of discussion and no end of fear and greed operating in mREITs. The hi-yield is ALWAYS under attack, not only by real-life market forces but also by the bashers who are out to short you to unhappiness. I see that there are many on these REIT boards who are trying to play both sides of divvy incomes and cap app. Usually both don't go well together. It takes a certain temperament to stay with the flow since if you sit through a whole year in a mREIT your emotions will get see-sawed quite a bit.
they have until september to pay out any income remaining from 2012 (all of the undistributed income). but they have until september next year to pay out any income from 2013. so there's room to shift things around.
in any case, income isn't slacking, and the SPO was not that big, so it won't be difficult at all to make the same div payment.
wilkus buying shares means two things: 1. he sees no threats to the company and an improving environment for its business model; 2. they'd made no decisions as of that date about SPOs or dividend changes. if they'd made any decisions and not told us, he'd be up for insider trading, and he's no dummy, so you can assume they'd decided nothing concrete.
I don't see how management can easily lower the dividend immediately after its current SPO. They would run the risk of alienating all of the "big money" that just purchased this SPO, making it more difficult for future placements...
Hence, IMO they keep it at $1.25 at least for this quarter.