We are changing our long-term recommendation for American Capital Agency (AGNC) from Neutral to Outperform, backed by its strong first quarter 2012 results and a healthy year-over-year earnings and revenue increase. American Capital Agency focuses exclusively on fixed-rate agency securities guaranteed by the U.S. government, which limits its credit risks.
American Capital Agency is also among a selected group of companies that have increased their dividend during the economic crisis. The company paid a total of $1.5 billion in dividends or $20.11 per share since its initial public offering in May 2008.
Our long-term Outperform recommendation on the stock indicates that it would perform well above the broader market. Our target price of $39.00, 6.0X 2012 EPS, reflects this view.
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