WatchI own a bit of AGNC. I was surprised today at the news and stock price movement.
"American Capital Agency Corp. (AGNC: News ) reported that its fourth-quarter net income increased to $208.71 million from $138.08 million last year. Earnings per share was $0.99 compared to $2.50 prior year.
Net spread income per share for the fourth-quarter of 2011 was $0.98. Comprehensive earnings per share for the quarter increased to $2.27 from $1.23 a year ago.
Net interest income was $262.82 million compared to $76.38 million last year."
I'm not sure how to read this. 4th quarter net income increased significantly (~50%). Earnings per share decreased significantly? (for the quarter, for the year?) Net spread income (what is this?), comprehensive EPS (what is this?) increased significantly compared to Q4 2010. Net interest income increased a bunch.
But the dividend was reduced significantly....and the price went up. I guess the decreased dividend was "priced in", but it caught me off guard, esp considering it has been steady for a long time. Makes me realize how "in the dark" I am. Anyone have any web resources where I could learn what all these things mean?
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I've posted this before. The comment period is now over and the ball is in the SEC's court (PDF). The Commission solicits commenters’ views about the application of the Investment Company Act to mortgage-related pools, including suggestions on the steps that the Commission should take to provide greater clarity, consistency or regulatory certainty with respect to Section 3(c)(5)(C).
SFace, thanks for commenting. I'm into a couple of mREITs for small amounts. Leverage upon leverage; this will end badly. The question is when (and if the SEC curtails the party early)...
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SFace says
Thanks for that. Helpful info, and may push me over the edge on selling....I bought pretty low, so why not sell high?
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Swebb,
Thanks for posting this. I saw the earnings this morning, and wanted to post this, but didn't have time. Basically, SFace summed it up pretty good. AGNC's profit margin has gradualy been compressed in the last couple of years. It's time to take some chips off the table. Today was a good day to do it.
Although AGNC's book value is $27.71. I believe there is a good chance you can pick it up for for slightly below this amount.
Here is the caveat. Although AGNC reduced its quarterly dividend, its reduced yield is still higher than its competitions like NLY, HTS & CYS. I would wait till June or July to see whether or not it will reduce its dividend again before making the next move.
Bob, this is one of those stocks that have been paying 20% in dividend in the last couple of years and not counting the stock appreciation. No, I don't have balls of diamond. :)
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Here are a couple of stocks that I think worth taking a look at.
1) NYB, it pays about 8% dividend annually. It broke above its downtrend line recently. I believe this is a good entry point between $12-$12.50.
2) CIM, it pays about 14% dividend. This is a hybrid mREIT, which is much more volatile than AGNC. I still kick myself for not picking more up at $2.55. I set my strike price at $2.50 & missed it by a couple of pennies recently. Why CIM? Its earning spread is over 4% compared to AGNC at 2%. However, it's way under-leveraged compared to its peers. It would be a decent buy at $2.90 & back the truck up at $2.50.
3) Once RIG broke above its downtrend line, watch out, it's heading to $60. My guess is that it will break its downtrend line in the next 1.5 months or so.
One more thing I'd like to add. The S&P and the DOW are sitting right at resistance so today was also a good day to raise some cash with the hope of a correction to come & we can buy back at a lower price.
That's all I got for now.
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Well, well, well. Sold 400 shares of AGNC and now it's a dollar higher. :)
Now I'm thinking of selling the remaining 700 shares.
CIM is at $2.90 and NYB is flat. Hmm....
What do u make of it SFace? Does it look like we're about to get a 4th wave correction? :)
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Well, looks like AGNC is back on track. The spread expanded to 2.07% compared tp 1.91% from last quarter. I expect the spread to get a little wider going into summer. Based on book value, the stock has a good chance of going to $32-$33.50.
Long AGNC. :)
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LONG AGNC,
Spread expanded and portfolio value expanded and will likely expand further in 2012 which is obvious. Business conditions are favorable and fully leveraged. Best updside of any mReit
Fed fund rate will likely remain low through 2014 so I like AGNC in the short term.
* Spread will be around 2% - 2.2%
* Marketable security value held will go up.
* Fed funds rate still going nowhere soon.
Triple green!
It's especially a buy given what I expect to be a tougher summer. If you must hold some equities, this is it. And if you must hold mReit, AGNC is the one.
This is a remarkbly simple business model.
Borrow 1M for next to nothing (or raise capital)
buy $10M bucks worth of government back security and net 2%.
Margin = 200K.
Overhead virtually 0
Tax = 0, Cash Dividend 95%.
Thoughts on Green Mountain ("GMCR")
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Wow. GMCR got destroyed. First, it lost its contract with SBUX. What percentage of their business was with SBUX? And what happened to the stock today?
Ok. I just looked at its balance sheet briefly. There must be more to the story. The projected growth is still fantastic, in the high 30%. That puts a foward PE of 7. Why is the stock so cheap?
The run up in the stock was justified due to the tremendous earning growth in the last couple of years, but now the crash? Could it be an overreaction?
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Any good dividend stock recommendations? is AGNC still a good buy til 2014?
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dcllee says
Lee,
I believe AGNC is fully valued at this price. The stock that I'm eyeing right now is CIM, and let me explain. I was going to buy 1,000 shares last Friday, but I ended up spending too much time talking to pkennedy and the market closed. :)
CIM reminds me of IVR last year when it dropped to around $13-$14/share due to a series of dividend cut. CIM is going through that right now & I believe it has a good shot of bottoming right around this price. CIM is currently paying out 15.5% dividend, and the dividend appears to be safe and should hold up at $0.36/year because it's still making $0.55/share. CIM has a book value of $3.27/share so it's one of the few mortgage REITs that's currently selling for below book value compared to its peers.
Of course CIM might drop lower if it keeps on cutting its dividend. Say if it cuts its dividend to $0.30/share annually, the stock will likely drop to $2.00/share. However, at this price point, I believe the reward outweighs the risk, but you shouldn't bet the farm on it.
That's my take & I'm thinking of selling some IVR. Some other mortgage REITs that I'm holding now are AGNC, IVR, NLY, ARR and CIM. I'm still regretting selling CYS.
That's it. :0)
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CIM broke support today. Take your 9-10% loss and move on. CIM has become a speculative stock at this time. If you want to let it ride, the wait might be 1-2 years before you know the result.
I currently have 1,850 shares of CIM. The amount of money in this speculative stock is insignificant in my portfolio so I will let it ride. I won't cry if it goes to zero. Can you afford to lose it all? :0)
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@Swebb,
I graciously bowed out and sold the remaining 700 shares of AGNC and 850 shares of IVR into the close today. It was fun and rewarding while lasted. All party will come to an end, right? Why? I believe their profit margin will get squeezed in the next several quarters, and the aggressive selling in the past week speaks volume. It was great that it bounced off its 200DMA. To me, any bounce is an opportunity to sell, not buy. I hope you can sell at $33.75 to $34 of the bounce this week.
At this point, I'm looking to deploy the money into stocks like T, MO or VZ. I will be doing some homework in the near future. Any stocks that you can recommend? :)
TIA.