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American Capital Agency Corp. Message Board

  • ronfal ronfal Mar 18, 2013 4:26 PM Flag

    OT - TWO SPO plus div declaration with special div of SBY stock!

    They announced the special dividend first and minutes later SPO.
    The last div was .55 and today .32 plus some SBY stock (19.27). We need to see how they will apportion the stock. Crisis or opportunity?

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    • I put in a buy-order in for TWO at 13.25 for today.
      It didn't get filled and doesn't look like it's going to, at least today.
      I might stay away unless I get much closer to 13 than 14.
      ...and moving the board.

    • Probable short-term opportunity. As Doc mentioned, going forward with a $0.32 quarterly dividend gives less than 10% annual yield at the current share price. However, with the distribution of SBY shares at a rate of 5 SBY for every 100 TWO, and SBY's share price of $19.27, this gives a total return of $1.27 ($0.32 + $0.96) for this dividend. That's 9.4% this quarter.

      Some big questions pop up now, though. Where the share prices goes between now and ExDiv-1 will depend on how investors value the short-term return this quarter vs the long-term prospects of a dividend at $0.32.

      Also, what will happen to TWO options given this special dividend of stock in SBY? Because it's stock, will the options not be adjusted? Anyone know how that works?

      • 1 Reply to engie095
      • engie - The SBY distribution is going to be a "special" and the options will be adjusted for it.

        I think you have to look at it as a .32 per qtr yield on say a 13.64 (AH quote now) minus the special of .96 for a net of 12.68 stock. That is a yield of 10%.

        Unless this new approval as a servicer under the Federal Home Loan Mortgage Corporation’s home mortgage program is worth something big to them, I think we see it drop from these levels as you and Doc are suggesting.

    • "Crisis or opportunity?"


    • ""The last div was .55""

      Misleading. The last published "regular dividend" was for .36 on Sept 20, 2012. The Dec dividend of .55 included a "special" dividend component. The .32 new dividend was expected, although some dopes from SA will scream about the big reduction from .55, which , again, is misleading, along with the stratospheric yield which, as all can see, is also wrong of around 16%.

      After the spo the yield will be approximately less than 10%, not the 16% the media has been reporting. I personally believe the PPS has risen on the assumption that the .55 was a forward dividend, hence the erroneous "forward yield" even published under "key statistics" on Yahoo reporting 15.9%.

      I have been warning that TWO is not a bargain at only 10% yield as there are many better players in this space, IMO.


      • 1 Reply to reits_r_us
      • yourbestfriendintheworld yourbestfriendintheworld Mar 18, 2013 10:53 PM Flag

        Now add in the nearly $1/share in special dividend value that comes from distribution of the SPY shares...

        I'd say to buy all the calls you can scrounge, but... the expiry is well after both divs, and a call in TWO doesn't get you the option to buy shares of SPY. Still, the market's perceptions may not be any deeper than "I get WHAT if I buy a share before the end of March?" The answer is "about $1.30 as a dividend" which amounts to about a 37% annualized yield. So how can you lose buying deep-ITM calls expecting a runup?

        SPY, on the other hand, is looking at several million shares to be dumped when they reach investors' hands in late April. So there's a moderate short play to be had there.

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