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AGNC Investment Issues Update, Cuts Dividend Amid Crisis

Zacks Equity Research

AGNC Investment Corp. AGNC recently announced that its projected net spread and dollar roll income for the first quarter, excluding estimated "catch-up" premium amortization cost, is expected to be at 55-58 cents per share of common stock. The Zacks Consensus Estimate for the same is pinned at 56 cents.

Moreover, the company sees a decline in its book value due to the financial-market dislocations related to the coronavirus pandemic and announced a cut in its April dividend payment to 12 cents from the 16 cents paid earlier. This will be paid on May 11, to common stockholders of record as of Apr 30, 2020.

Notably, as of Mar 31, 2020, the company estimated tangible net book value per share of common stock of $13.60, following deductions for common and preferred dividends declared through Mar 31, 2020. This denotes a decline of about 23%, year to date.

This update comes in light of the coronavirus pandemic and the consequent market disruption and dislocations, along with the significant liquidity reduction. Recently, Annaly Capital Management, Inc. NLY also provided update for its business operations and portfolio management.

Amid substantial volatility and lack of liquidity, the company has adopted aggressive measures to sail through the current turbulence, strengthen its liquidity position and alleviate risk. Moreover, the Federal Reserve’s measures have helped the agency mortgage-backed securities ("Agency MBS") market to gain strength.

As such, AGNC Investment, investing mainly in residential mortgage-backed securities, for which the principal and interest payments are guaranteed by a U.S. Government-sponsored enterprise or a U.S. Government agency, will likely benefit.

Particularly, the company’s total investment portfolio was approximately $93 billion as of Mar 31, 2020. This included $21 billion of To-Be-Announced ("TBA") Agency MBS and $1.1 billion of non-Agency securities.

The company focused on maintaining a solid liquidity position. Estimated cash and unencumbered Agency MBS were $3.5 billion as of Mar 31, 2020. As of the same date, the company's "at risk" leverage was 9.4x.

Moreover, the company noted that its previously-announced $1-billion share-repurchase program that was authorized by the board of directors last July remains in effect. The company has a remaining repurchase capacity of $0.9 billion available under the program.

The coronavirus outbreak has been wreaking havoc on the global economy. The crisis has battered most industries, and the economic and financial consequences have adversely impacted mortgage markets.

Investors have resorted to shedding risk exposure across all asset categories and boost cash position, resulting in pricing pressure and liquidity issues in MBS markets. Further, chances of delaying or defaulting on mortgage payments by homeowners have escalated. Nevertheless, the Fed’s efforts to support the market’s smooth functioning are likely to provide some relief.

Shares of this Zacks Rank #3 (Hold) company have plunged 31% so far in the year, narrower than its industry’s fall of 46.6%.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

New York Mortgage Trust, Inc. NYMT currently flaunts a Zacks Rank of 1. The Zacks Consensus Estimate for the company’s earnings per share for the ongoing year moved marginally north to 77 cents over the past month.

ARMOUR Residential REIT, Inc. ARR also sports a Zacks Rank of 1, at present. The company’s earnings per share estimate for 2020 has been revised 4.7% upward to $2.25 over the past 60 days.

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