But of all the things i've read or heard from tv, all say the agency debt/rmbs is fine. Witness that the bond market is quite cheaply financing agencies to treasuries at 30 over.
So at the end of the day you're back to a div of 26%+ at lowest risk currently available in bond and stock market purchased at a 20% discount. The big div will create buyers steadily till the sp doubles in a year imo. Or just keep stock LT re-deploying that money as it comes back to you 26% a year rate. Nice.
Where did this 27 day number come from for annulaizing the dividend? By my calculation, the dividend was for 41 days (May20-Jun30), not 27, thus annualizing it results in an annual dividend of $2.75, or about 18% (not 26%) which is in line or even lower than competitors ANH and CMO....I saw the 27 day number in an anlaysts report too, but to me it is wrong unless some rough (and inaccurate) effort was made to estimate when IPO proceeds were invested
The press release from AP on Yahoo Finance is a bit confusing and/or poorly written. It reads "from the closing of the company's initial public offering and concurrent private placement on May 20 through June 30."
One would think they are referring to 40 days, but remember English grammar and prepositions - the May 20 through June 30 date is simply the date of the private placement start till closure - at least that is what I believe they meant.
However from the www.agnc.com website, please see below where the div information is posted the following, which I have now twice confirmed via telephone with IR. IR tel # is 301-951-6122.
"Reflects the dividend for the shortened "stub" period from the closing of the Company's initial public offering ("IPO") and concurrent private placement on May 20, 2008 through June 30, 2008. On average, the portfolio was deployed for approximately 27 days during the stub period." http://www.agnc.com/investor_relations/dividends/index.html
Thank you for your reply. I'm taking a bit of a bold approach in my premise about agency rmbs being like treasuries and posting my prediction. Hopefully this will bring out more contrary comments for a complete discussion of AGNC's prospects to more fully understand the risks. I could be wrong about the risk so I am seeking opposing arguments.
The biggest risk I see is if the fed and treasury recapitalize the GSE's with equity from the Agency RMBS's. I have seen one person say this is the best way to recap the GSE's. He was on CNBC a few days ago and is a prominent financial adviser, but is not with the fed, treasury, or any of the GSE's. His thought was that common stock was worth zero, and primary debt holders/agency rmbs would get 90 cents on the dollar and warrants for the new common, which on a cash flow basis he predicted would be quite profitable. But Bill Gross from Pimco yesterday seemed to discount this plan imo by saying he preferred agency rmbs to treasuries.
I disagree with your numbers. The .31 dividend is for the period of May 20 - June 30, which is 41 days not 27, that makes it .00756 per day or .68 for the quarter. At 15.86 per share, that gives a yield of 17.15%