MBS prices are getting killed this quarter. Look for BV dropping and even more SPOs. Add that to the fact that AGNC dug into its BV to maintain the dividend and this thing could drop big time after EX. Thoughts?
a/ $1.25 Q4 dividend $0.36 Q4 comprehensive income
b/ $2.18 per share undistributed taxable income at Dec 31 is not a part of shareholders equity/book value
c/ The following page on book value rollover from their Q4 presentation
(In millions, except per share data)
Sept 30, 2012 Net Common Equity (1) $11,100 341.6 $32.49
Net Income 810
Other Comprehensive Loss (684)
Dividend on Common Stock (424)
Dividend on Preferred Stock (3)
Balance before Capital Transactions 10,798 341.6 $31.61
Repurchase of Common Stock (77) (2.7) $29.00
Dec 31, 2012 Net Common Equity $10,722 338.9 $31.64
When the earnings aren't there the dividend payment has to come from somewhere.
Little backwards there Bruce, aren't you? As MBS get expensive like last Q, assets are sold at higher prices, share buy back occurs, which drives BV down. As MBS get cheaper, you are correct spos become more frequent so more paper can be bought to produce more earnings, which increases assets, which drives BV up.
A common misconception is that accretive spos are a bad thing. Contrary to that notion, accretive spos are a good thing as it maintains BV and ultimately increases BV as more earnings are created through the purchase of more performing assets at reduced prices which increases the spread, producing even more earnings(income for distribution), etc, etc....
Let the spo's begin...surest free money I know...;-)
MBS's got more expensive last quarter? Not compared to Sept 30 market values they didn't. They fell. And they are falling even more significantly in Q1. Last I checked falling MBS prices lowers the BV.
With respect to the SPO, my take is that AGNC management saw that falling MBS prices were not being reflected in the PPS. When the premium over BV got significant they went ahead with the SPO. So it all comes down to what you think the current BV is. Given the brutal week for MBS prices and news that they are maintaining their dividends through their reserves, I believe BV is currently in the $30 and lower range. Hence the concern over the drop after EX. What is your guess at BV Doc?