They've been burning through capital since 2006
"In February 2006, the Company completed the initial private placement of units at $10.00 per unit ($30.00 on a
post-split basis) that generated net proceeds of approximately $78.0 million. In December 2006, the Company
completed a private offering of shares of its common stock at $10.00 per share ($30.00 on a post-split basis) that
generated net proceeds of approximately $105.8 million. In May 2008, the Company completed a private
offering of units at $5.20 per unit ($15.60 on a post-split basis) that generated net proceeds of approximately
$14.0 million. On June 17, 2009, the Company completed its initial public offering of its common stock at
$11.00 per share that generated net proceeds of approximately $105.8 million."
but you're right, the public was spared the pleasure losses at CYS until 2009. Compare that legacy of loss at CYS to the incredible gains straight through the heart of the credit crisis at the pre-IPO private predecessor of TWO, Nisswa Fixed Income Fund. Nisswa Fixed Income Fund was run by PRCM, TWO's external manager. History rhymes. You've got to do a bit of dd digging to find this stuff out, but it is all in the SEC filings of CYS and TWO and well worth knowing before you toss money out there.
Right about the out performance wrong about CYS facts IPO'd in 2009. Whole different company who cares about a reverse split that has nothing to do with CYS post 2009 ipo.Thanks for opening my eyes though to AGNC's track record,and what seems to be a great management team will look for a good entry point and some good quality stoogies.Thx GL!
No your right about the out performance after further DD but CYS performance has been respectable since 2009. I have no info before that so that's the smoke I'm referring to.I can't see where you are referencing back to 2005!?
Whoops, had you mixed up with someone else, sorry quad.
"...they had drop "losses" I assume they'd report it the same way."
Precisely, they always spray paint that particular dime orange because as they have defined "drop income", "drop losses" can never occur. That's why they invented the tricky term and love to highlight it. MBS forwards pricing being lower than instantly settling MBS pricing is an industry standard practice, money has time value. Even if, as was the case is 4q10, by the time the forward MBS settle they could buy an identical instantly settling MBS for far cheaper than their forwards settling cost basis, they can still claim that "drop income" occurred. Thus they will always have a positive number they call "drop income" every single quarter no matter how devastating the losses investing in MBS forwards can be during rising rate environments. They imply that investors should add "drop income" on to core earnings when assessing dividend coverage, what trickery, it's just a component of NI and painting a dime orange doesn't increase it's value. They use this myth to make their divvy appear covered even when it often isn't. You might be right, the divvy may have been covered in 2q11 because NAV rose without SPO, the rally in MBS prices in 2q11 makes that plausible, but I suggest that you ignore "drop income" when you asses their results, it's a gimmick.
Yes, CYS's earnings certainly blow, and I sincerely hope AGNC's earnings are nothing like theirs. 2q 2011 was yet another quarter in which they paid a liquidating dividend, just like they did in 2010. From page 86 of the CYS 2010 10K, CYS had a total return 6.68% in 2010, far less than the dividend yield. I can think of several bonds and preferreds I'd rather own that yield over 7%, owning them I wouldn't have to endure any fancy fast talk about how "drop income" is somehow covering the dividend. But I'm not interested in 7%, I don't own CYS, and I am not interested in hearing that AGNC (which had and Economic Return of 32.7% in 2010) "...SHOULD ALSO." like CYS. God I hope not.
I'm not sure you've fairly characterized CYS's results.
1. Drop income is a reasonable approach when a tactical decision has been made to acquire securities with forward settlements versus outright purchases. The accounting isn't "fancy fast talk" and in any event accounting treatments should occlude economic transactions;
2. Total return for 2010 was comprised of dividend yield and share price - which declined. A declining share price is not a component of liquidation - it is a market phenomenom;
3. CYS increased net interest margin by 40 basis points Q over Q;
4. CYS increase book value by $.61 Q over Q, hardly representative of a "liquidating dividend".