I think they will hold the dividend at least for this and next quarter. I am bit more concerned of an SPO if we get into the $30's this week though. Think it would be a mistake on their part to do one though. Need to let the new's cool off and post up some better numbers next quarter before an SPO. I highly doubt on this run that pps will get much over $31 if that. I see nothing to drive the pps higher into the 32-34 area's with performance of last quarter not forgotten. I am sitting on 4K of shares so not shorty talk. Just being realistic.
AGNC is a levered bond fund which is traded like a stock. As such, the price will never vary much from the book value. If the price rises more than 5% above book, it becomes unsustainable. Selling additional stock simply reverses the price rise, which would have happened on its own. Such sales are accretive to existing investors.
The stock price tends to rise above the recently reported book when expectations are that the next earnings report will show gains in both taxable earnings and book value. Conversely, the stock price tends to be weak when earnings expectations are negative. A stock price below book is also unsustainable, so the company corrects the problem by way of share repurchases. These are also accretive.
Although both book value and dividends affect the stock price, the book value probably has much more impact. Book is calculated on a daily basis by AGNC, but the information is only released to the public every three months. Purchase of AGNC constitutes an expectation for an increasing book, which is primarily a vote in favor of the management's skill.
In September we're heading for another confrontation over the debt ceiling. Republicans are once again asking for spending cuts. Last time such a battle took place, the 10 year note sky-rocked in price. Even a minor confrontation in congress this fall will boost treasuries, and with them Agency RMBS, to provide a big boost to book and taxable income.
During the conference call, Gary Kain was asked if the dividend would be sustained. He, as expected, refused to provide a definitive answer, but instead listed all the considerations behind the dividend decision. Taxable income was one of many. Expectations of future performance is also important.
My take away was that although Kain is not absolutely sure of this quarter's dividend, he believes there's only a small chance that conditions will support a cut.
Xion if AGNC does not cut the Dividend it means the the Dividend is not related to earnings. If you get the same Dividend in bad earnings why did we not get more in good earnings? I expect a cut.
one of the reasons I held for so long while they had a ginormous overhang in the taxable REIT earnings column. I was expecting them to do a special to clear it. now they don't have to do it.
they have $1.08 per share of undistributed taxable earnings left. they earned 50 cents in Q1. another 50 cents or so in Q2 could push the distribution date far, far into the future.
the dividend is absolutely related to "taxable REIT earnings" per IRS rules. everything else is fluff and GAAP #$%$.
I think they would be smart to lower the dividend and I think the price will adjust to a 12% yield which should not do much to the current price. The Mreits are in very tough times. The spreads are narrowing and the hedges are not working. Doc Reits is very smart. Let the dust settle.
yeah, when the "dust" settles this stock will be $33. Keep waiting for that "dust" to settle. The FED can not and will not stop QE purchases for quite some time.. they will keep talking about stopping but the truth is they cant stop. The fed targets will not be reached by anytime soon. I see the economy slowing down significantly in the second half of this year and trouble in Europe to mount. It's funny, a couple months ago everyone was talking about how the fed should scale up its purchases.. and ben said a comment that the "fed will scale up or down purchases as necessary" And was an emphasis on up because everyone was hoping the fed would scale up purchases. Everything looks all "butterflies and roses" one month and TERRIBLE, just outright MORBID the next... that is the attitudes of these traders in the financial markets. The only thing you can bet on is that there will be a lot of volatility in the future as to what is the real direction of the economy... and the truth is.. THIS IS A SAD.. SAD economy because we have a negative real interest rate and yet the economy still cannot create 200,000 jobs a month. ITS PRETTY FREAKIN BAD.
I dont think you should own AGNC though, I think MTGE is the buy here. The ability to go into nonagency and fill a void where the GSEs are going to be leaving the space is pretty important. The ability to leave agencies if the spread becomes too flat is important. Of course the spread is going to flatten out.. its a matter of when.