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American Capital Agency Corp. Message Board

  • taymere_lane taymere_lane Jun 10, 2013 7:04 AM Flag

    Is the $1.25 dividend sustainable?

    (Part I)

    In AGNC 1q13 ER conference call http://seekingalpha.com/article/1400301-american-capital-agency-s-ceo-discusses-q1-2013-results-earnings-call-transcript Gary Kain makes it clear during the Q&A portion of call that he thinks most of the damage has already been done to taxable during Q1:

    "...many of the TBAs that create the realized gains and losses actually have already been rolled to the next quarter. So it's not completely variable with respect to what happens in the market. Again, a good chunk of those levels have been
    locked in for the quarter, so to speak."

    He also points out that such negative impacts to taxable from pairing off TBA's go the other direction during bull flattners, boosting taxable in a manner that I would describe as temporary fluff:

    "....in Q1, you had an
    environment where just the price of the underlying irrespective of the dollar roll level was declining and you were locking in these lower prices from the
    perspective of realized losses. ...In the case where mortgage prices are going up, then you will be in a situation where you will actually end up with more taxable income than you
    probably should in that environment to or then what’s actually implied by the drop and so you will have the reverse of that scenario."

    In terms of absolute rates, and in terms of payups market prices are now right back around at the levels that we were in 1q12 when the div was reduced from $1.40 to $1.25. And our BV is now right back around at the level that it was in 1q12.

    (to be continued)

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