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American Capital Agency Corp. Message Board

  • instantwinbutton instantwinbutton Oct 16, 2013 10:24 AM Flag

    AGNC should be down a lot more than this, MBS keeps dropping.

    Value of their assets keeps going down but the stock stays up... it's like the invincible company lol.

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    • The 10 & 30 year T-bills are now trading at the same levels as back on July 5, 2013, luckily the stock's price isn't trading in that area. There was so much more doubt back then and the next bump up in interest rates won't shock the market as much. Good day to be long!

    • The dividend yield is around 14% - which is insane. With a dividend yield that high, the company should be trading at about 5 times it's current price. A stock price of $111.35 would drop the dividend yield down to about 2.80% which is a lot closer to, say, the dividend yields of stocks in the DJIA.

      But if the value of their assets keeps going down (as you say), that explains why the stock is not going up. Maybe what is going on is Wall Street is leery of buying more of this stock since its assets are shaky - yet Wall Street can't bring itself quit American Capuital Agency's huge dividend payments. So the stock goes sideways.

      Sentiment: Hold

      • 3 Replies to misterbjenkins
      • That is not true. Those dividends are highly leveraged and thus very risky. No one would expose them selves to that level of risk for just 3%.

        They are 14% for a reason. It is because many of these mREITs go bankrupt when interest rates go up. Most mREITs have a leverage ratio of times 8. Can you imagine what that does to the value of the loans when interest rates go up? Also if the interest rates rise enough that they are paying more to borrow money than they are getting interest on their loans then they are losing money. With average spreads of about 1.5% that means a rise in 1.5% in mortgage rates and you can start counting the months before they run out of cash at which point they are insolvent. Who would own an investment that risky for just 3%?

      • Dividend yield is high because professional investors are pricing in future divy cuts and/or BV decline. The price of the stock is still too high, it only has a long term fair value of $8-10, on sustainable dividends with a lot less leverage. You have to reduce future divy's by leverage reduction due to the new regulations coming out Dodd this and that laws and Basel dum rules.

      • well it used to yield more of 20% from 2010 to 2011. Also, you can't value AGNC like an DJI company. A DJI company retains a portion of its profits and sells a real product. AGNC does not.

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