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American Capital Agency Corp. Message Board

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  • jdg8002 jdg8002 Feb 7, 2012 1:02 PM Flag

    Core spread income


    Let me try this again:

    Core earnings were .99 cents in Q4. Comprehensive income was $2.27. Non core earnings were $1.28, not a loss. The "Other Income" items you cited are only a component of the non-core earnings.

    Taxable earnings were 1.61. Assuming core earnings were approximately equal for GAAP & Tax, that leaves .62 taxable income from non core activities (like trading and hedging).

    That .62 would have to fall by .36 (more than 50%) to put taxable income below 1.25 for Q1. If you don't want to look at it that way, than total taxable income has to fall from 1.61 to below 1.25 (over a 20% drop).

    Undistributed earnings will not be impacted unless that happens and that account actually grew in Q4 in real terms, so it wasn't eaten into in Q4. It shrank on a per share basis because of the SPO.

    I was trying to figure out why so many believe management will have to rely on the undistributed earnings to cover the 1.25 going forward absent another SPO.

    Its possible, but I don't see where the Q4 numbers support that idea.

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