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American Capital Agency Corp. Message Board

  • usisbest50 usisbest50 Jun 18, 2013 11:44 AM Flag


    Do any of you know how dividends for mReits work??? I see people talking about suspending dividends and people saying a cut could make the stock stronger. Are you kidding me? do people not understand that 90% profit is distributed as dividends???

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    • they MUST pay out 90% or their REIT earnings as a dividend. subject to some time constraints. note that REIT earnings are not the same as GAAP earnings, which include things like paper losses and gains, to name two. try not to use the word profit, as it ain't the same thing.

      AGNC has a history of trying to maintain a stable dividend for extended periods. like a year or longer. as long as they follow the distribution rules, they can carry undistributed income, and let good quarters even out the bad. right now, the undistributed earnings stands just over a buck per share.

      in some ways, cutting the dividend by a small amount, voluntarily, can be much better than involuntarily at some future date. one of the things to be wary of, is maintaining the $1.25 in the face of another quarter that does not have $1.25 worth of taxable REIT earnings. like the last one. another bad quarter will wipe out the undistributed income entirely, forcing a cut to whatever they can squeeze out the quarter after that.

      much better to reduce now, to say a dollar per quarter per share, with a strong possibility of maintaining that for an extended period. it would bring certainty to the share price, since investors would KNOW what they are buying.

    • As earnings is reflected on management, this factor is very important. Must say the planning of this company for a taper is somewhat lacking.

    • The reason a small cut is not a problem is Mr Market does not like uncertanty.
      When a cut happens (if it does, and if it is not too much) my Market is happy and the price goes up.
      This is not just for AGNC, and must most any REIT.

    • Last check still .90 per share undistributed.

    • And don't forget that they still have some money being held that needs to be distributed. I'm OK with a slight cut as I think that not cutting would be interpreted badly by the market.

      Sentiment: Hold

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