I was paddling my canoe throught the blood in the streets, and couldn't resist picking up some AGNC shares in the 24.60s. Let's plan on a decent DD and a little boost over the next week. I'm going to eat quite a few June calls, but such is the nature of the dance ("Roys" would have been more prudent).
I don't see an SPO in the works prior to the X-d. If history holds, we have less than 3 weeks until the X-d., and management's express desire is to keep share price stable and deliver a consistent yield. Issuing new shares prior to the X-d. would drive the price down and create an additional dividend "load", putting further pressure on a dividend/yield reduction.
Best case scenario would be if management uses the undistributed taxable income (1.08 share) over the next two dividend payments to maintain the 1.25 dividend, using the time to reposition the portfolio based on the changing landscape.
Great get at 25.11. Yesterday/this morning's high volume looks to me as though the seller's are throwing in the towel. The pps is currently $1.20 off of this morning's lows, and with the dividend w/in 3 weeks, I'm hopeful that the price can gain some traction. Thanks for breaking down the risk in AGNC's hedging activities.
Greetings, Quad. Funny thread. I hope that you are still enjoying life on the farm.
As regards AGNC, this Q I'm trading shares and the June 29/30 calls. I'm risking capital (perhaps unwisely...depends on "direction") based on three salient points.
1. SUPPORT AT BV/SHARE
While AGNC's stock price did touch 28.14 on May 15th, it quickly bounced back close to its current price. I see this as support around the MRQ BV/share, reported as 28.93. For those parties willing to assume the inherent risk, entering a trade at BV/share, particularly in the last month of the dividend cycle, appears defensible. Even Gary Kain is buying (332,794 shares on May 12th).
2. RISK OF SPO
The threat of an SPO disrupting price is diminishing as we approach the X-d., approximately 6-21 (swag). Also, with pps at the current BV/Share, any SPO subscriber discount (historically 3-4%) would be dilutive to price. In essence, AGNC would be selling shares below liquidation value. In the last calendar year, AGNC's management implemented a "Buy-Back" plan when the price dipped below BV/share, so it would appear counterintuitive that they would issue new stock at dilutive (to BV/share) prices.
3. POTENTIAL FOR DIVIDEND CUT
A decrease in the dividend would obviously put downward pressure on the pps (with the exception of March 2012). However, I'm not convinced that a dividend cut is imminent. The MRQ's financials revealed that AGNC is sitting on $1.08/share in undistributed earnings, which must be distributed by mid-September. Sans an SPO that would require more shares to fund (dividends), distributing the undistributed earning with the current earning should protect the current dividend ($1.25) through September.
Time will tell if I am on the right side of this trade.
Smart move! No more "all in". The $100K limit will preserve your capital, and the apartment building will provide you with an appreciating asset that flows cash.
Thanks for the kind words. My "strategically" placed bets have done well thus far in 2013, with the exception of some ill placed calls on LINE and EVEP. Thanks again for pointing me at GILD; I may re-enter a position if the Phase 3 trials on Sofosbuvir can get underway quickly.
Wow! St. Maarten. I haven't been there since 1989...I'll bet that things have changed quite a bit. I really enjoyed the cuisine on the French side and the casino action on the Dutch side, not to mention the beautiful water...What fun to celebrate Greek Easter with Greek friends. It is always a enlightening to have new cultural experiences.
Thanks for the trip down memory lane with your reprint of my old Xmas poem; it served as a good reminder of the DD members that have passed through the turnstiles. BTW, how was the Burj Al Arab this past New Year's Eve? The fireworks looked spectacular. I'm guessing that was your destination as it looked to be the coolest venue in Dubai.
Anything new on the VC front? You always have very interesting investment ideas. And last but not least, it's warming up in Monaco, so it's time to take the cover off of the spyder. I'll bet that you can't wait.
Who knew. Just read the ER and couldn't believe the drop in BV/share. This seemed to go against the conventional wisdom:
NET BOOK VALUE
As of March 31, 2013, the Company's net book value per common share was $28.93, or $(2.71) lower than the December 31, 2012 net book value per common share of $31.64, reflective of generally lower pricing on the Company's MBS portfolio and due to lower "pay-ups" (or price premiums) on specified pools of securities with favorable prepayment attributes.
"Fixed-rate agency MBS prices declined considerably more than both U.S. Treasury securities and interest rate swaps during the first quarter, as market participants began to price in an early end to the Federal Reserve's third round of quantitative easing ("QE3") amid stronger economic data..."
Obviously more to follow. PPS already down $1.04 AH.
Excellent post. I was just reviewing my notes and noticed that the last SPO (2/27/13) was offered at 32.78, with net pricing somewhere in the 31.65 range, coinciding with the MRQ BV/Share (31.65 @ 12-31-12).
In the interim, the yield on the 10yr T's are down from 1.86 (1/2/13) to 1.66 (5/1/13). Due to M2M accounting requirements, the decrease in LT rates should result in a higher BV/share. If anyone on the board can correlate the effect that a 30 basis point drop has on the BV/share, this will give us a realistic pps target for an accretive (to BV/share) SPO.
I may be jaded, but unless the decrease in spread is enough of an impediment to stop the wheels, I anticipate an SPO prior to the next dividend payment. If the stock in fact has a positive ER, with strong 2013 dividend guidance, IMO, a near term rise in the pps will further set the table for a 2Q SPO.
I'm going to maintain my share position through the ER, but if a significant bump occurs, I'm probably out until either an SPO or the X-d (My shares have already earned the dividend in cap appreciation). The ER should be interesting. Stay tuned...
Congrats on another year under your belt. Here's hoping that your health improves and that the issues with your new home have been resolved in your favor.
BTW, have you been able to correlate your patented work with Mutual Fund returns to AGNC's price movement? Just curious. I read your patent and it looked very interesting. Regardless, let's make some more profits this year with AGNC.
Greetings Salty, Jim, and Doc:
I just got back from Bali/Lombok, and after a 38 hour elasped time from hotel to house, coupled w/a 15 hour time zone differential, I'm not quite sure what day it is.
Doc, great job on the trading system. It's an excellent starting point, but as you pointed out, the buck stops with the trader pulling the levers. Did you look into the BMY trade that I suggested? I was't trading while I was gone, but I did give it to another friend, and he made a nice double on it.
Salty, I owe you one. I cleared out my position in GILD prior to my departure in mid March, and banked a nice 5 figure profit. It looks as though it may still have some gas in the tank. Speaking of gas in the tank, I hope that the weather out your way is warming up so that you may enjoy your spyder. I saw one zipping around SoCal recently and thought of you.
And last but not least, Jim R. (the original DDjim#1), how the heck are the fish biting down your way? We miss your Gant charts! I hope that all is well in the Sunshine State and that you are spared any Hurricanes this season.
BTW, I just nibbled on some BPT calls this morning, and I'm looking forward to shaping some MLP trades (KMP, LINE, EPD, et al) in the next few days. As always, AGNC is in the reticle.
The answer to that question is a simple one: extended hours trading (both pre-market trading and after hours trading) does not affect dividend rules. Buy before the ex-date (no matter if in pre-market trading, regular hours trading or after hours trading) you qualify for the dividend; buy on or after the ex-date (whether in pre-market trading, regular hours trading, or after hours trading) you don't qualify for the dividend.
The "Record" date is simply the trailing paperwork. Per the definitions above, if you buy prior to the Ex-dividend date (3/18/13 for AGNC), you will be entitled to the dividend.
FWIW, as the old saying goes, nothing in life is free. When AGNC opens on Monday, it will more or less reflect Friday's closing price, less the $1.25 dividend. It may not open at exactly $1.25 down, but it is usually in the ballpark.
AGNC typically declares a dividend every quarter. If you want the next AGNC dividend ($1.25), you must buy AGNC before the After Hours Market closes tomorrow (Friday). You may then sell your shares as early as the open on Monday, and you will still be entitled to the dividend, which will be credited to your account on April 26th. The following dates should answer your questions.
Mar 07, 2013 AGNC Dividend of $1.25 declared
Mar 18, 2013 AGNC Ex-dividend date
Mar 20, 2013 AGNC Record date
Apr 26, 2013 AGNC Payable date
For a greater understanding of what these dates actually mean, here are some definitions from investopedia:
Declaration date - This is the date on which the board of directors announces to shareholders and the market as a whole that the company will pay a dividend.
Ex-date or Ex-dividend date - On (or after) this date the security trades without its dividend. If you buy a dividend paying stock one day before the ex-dividend you will still get the dividend, but if you buy on the ex-dividend date, you won't get the dividend. Conversely, if you want to sell a stock and still receive a dividend that has been declared you need to sell on (or after) the ex-dividend day. The ex-date is the second business day before the date of record.
Date of record - This is the date on which the company looks at its records to see who the shareholders of the company are. An investor must be listed as a holder of record to ensure the right of a dividend payout.
Date of payment (payable date) - This is the date the company mails out the dividend to the holder of record. This date is generally a week or more after the date of record so that the company has sufficient time to ensure that it accurately pays all those who are entitled.
Nice heart shot. Your feet were at shoulder width, your nose was on the string, and you were at your anchor point. You followed AGNC's climbing trail over the last 2 weeks, and when you let your arrows fly, they went straight into your bank account. It has been very profitable tracking this prey every (almost) quarter. Let's plan (hope) for more of the same next quarter.
It's great seeing the DD (old and new) nailing excellent returns on this cycle. Seems like old times.
Congrats on making up for December's disappointment. Now, please take stock in the advice of Doc, Rim, and others. Risking ALL of your hard fought gains on one stock (option), in a market fraught with Black Swan opportunities, is not a smart move. While it may yet prove profitable, it exposes virtually your entire bankroll to unanticipated short term price disruptions at the macro and micro levels. The philosopher George Santayana once said, "Those who cannot remember the past are condemned to repeat it".
I would hope that you learned something other than pain, from your experience in December.
Thanks, Rim. I decided to unceremoniously close out the rest of my position today at 33, when I noticed the heavy resistance. I decided that preservation of my existing profits was more important than the possibility of additional gains in the next two days.
Yesterday's April 31s returned 125%, with today's March 32s (acquired on Friday, March 8th) returning100%. You gotta love AGNC. It should change its symbol to ATM (machine). Congrats again on your 125% score.
Here's hoping that our old friends in the DD made a killing this "cycle".