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American Capital Agency Corp. Message Board

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  • jtrader64 jtrader64 Nov 1, 2012 2:34 PM Flag


    Thanks for posting xxavatarxx. I listened to the call and got the sense that the dividend would either stay the same or be decreased but not increased given this environment of lower returns with lower risk (the lower risk being from the Fed providing support to the value of AGNC's assets because of QE3).

    You posted part of what Gary said but here is the full response when questioned about the dividend:

    "Now that one put aside, let’s look at the dividend, what I want to stress with respect to the dividend is that we have quite a bit of flexibility. Our biggest constraints that we talked about this at in last quarter, are obviously taxable income and undistributed taxable income and clearly, we have a large amount of undistributed taxable income. What does that mean? It means, taxable income is unlikely to be a constraint any time soon with respect to the dividend. The other key thing is that we don’t want to put book value at risk by paying a larger dividend even if we have taxable income to do that. When you look at what’s happened with book value over the last year, okay, were actually since the beginning of 2012, not just this quarter, book values up like 20% despite paying a healthy dividend. So we feel we have a lot of flexibility with respect to book value.

    Said in other way, we could maintain the current dividend for an extended period of time, we have to evaluate though against the environment that we discussed, one which is clearly characterized by somewhat lower returns but also lower risk, what the right strategy is for the dividend in 2013 and beyond, and we don’t really, and I think it’s too early to kind of give any more detailed discussion of it. But that’s how we’re thinking about the world and we know it’s obviously an important issue to investors."

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    • I know we put a lot of attention on core earnings which were gloomy, but seems they have big chunks of realized and undistributed gains ... don't they have to show 90% distribution comming up soon? Buybacks could eat it but I wouldn't be suprised if div was raised for Dec or if we see a special div anouncement. Something to consider....

      As for 2013 (perhaps beyond) ... core earnings are likely to remain gloomy for 2013, but rising BV may mean suplemental realized gains and ballance things out quite a bit. I also expect to see Agency REITs to do more buybacks (don't see too many other good options??). I save explaining, but all said, I don't see any of this as negitive!

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