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American Capital to Offer Shares

Zacks Equity Research

American Capital Agency Corp. (AGNC), a real estate investment trust (:REIT), recently announced  a public offering of 32 million shares to increase its liquidity. To cover any over-allotments, American Capital also plans to offer a 30-day option to the underwriters to purchase an additional 4.8 million shares.

The net proceeds from this offering will be utilized to acquire additional agency securities in accordance with the prevailing market conditions and for other general corporate purposes.

During the first quarter of 2012, the company raised $2.4 billion of net equity proceeds, which included $2.1 billion from a secondary offering, $142 million in a controlled equity offering, and $167 million from preferred stock offering. As of March 31, 2012, American Capital’s cash position stood at $2.1 billion.

The company has been paying a steady dividend over the years. American Capital Agency paid a dividend of $1.25 per share in first quarter 2012, which equates to a total of $1.5 billion in dividends or $20.11 per share since its initial public offering in May 2008.

American Capital focuses on investment in mortgage pass-through securities and collateralized mortgage obligations.The company purchases single-family residential pass-through securities, which are interests in pooled loans of principal and interest including pre-paid principal that are made to the holders of the notes. Collateralized mortgage obligations consist of multiple classes with payments of principal and interest being made to note holders based on the maturity date of the class of security.

American Capital currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Outperform recommendation on the stock. One of its competitors, MFA Financial, Inc (MFA) holds a Zacks #2 Rank, which translates into a short-term Buy rating.

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