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American Capital Agency (AGNC -0.2%) estimates a similar decline in book value through June 7 as...

American Capital Agency (AGNC -0.2%) estimates a similar decline in book value through June 7 as that experienced in Q1 (8.6%), putting June 7 book value at $26.44. At the current price, the stock is trading at about a 7% discount to book. The numbers were disclosed in slides prepared for the company's presentation at the Morgan Stanley conference at 3:35 ET this afternoon.
Comments (18)
  • Kain said in his May announcement that "BV is already climbing back" from the Q1 announcement. I took him at his word but it's still dropping. The market is pricing in continued BV erosion and a dividend reduction down to $1.00. If the divvy is <$1.00 this thing could hit $22 in a panic sell of scared retirees.
    12 Jun 2013, 12:15 PM Reply Like
  • I'm thinking if $AGNC dividend doesn't go below $1.00, the price will keep dropping because they will just be digging a deeper hole.
    12 Jun 2013, 01:21 PM Reply Like
  • BV climbed back in April and then dropped in May. Kain referred to April's increase. Get your facts straight.
    12 Jun 2013, 05:08 PM Reply Like
  • It 's 8% exactly below BV right now, since it's collapsing (as always) today.
    I think they should announce the dividend, although I am not sure how much benefit will cause, since MITT has just announced its dividend (above expectation, without any cut) and its stock price has collapsed today almost 5% despite the good news.
    12 Jun 2013, 12:15 PM Reply Like
  • What are you talking about. The stock is off 0.7% today on a market drop of 0.8%. Get your facts straight.
    12 Jun 2013, 05:06 PM Reply Like
  • richbar, it was MITT that was off 6.6% after announcing they were keeping the dividend the same. AGNC was off .7% today. CYS is off 3% after announcing a dividend increase. The point is, dividend good news can't seem to overcome FED uncertainty in the market.
    12 Jun 2013, 11:52 PM Reply Like
  • Will buy at 20. It will drop more because of domino effect since investors set up their stop losses to preserve their capitals.
    12 Jun 2013, 12:42 PM Reply Like
  • It will never get there.
    12 Jun 2013, 05:09 PM Reply Like
  • And if it does go down to $22, mortgage your house and buy as much as you can.
    12 Jun 2013, 02:00 PM Reply Like
  • if the divvy is 1.00 that will be good 15%+ i am retired any thing over 12 is great will buy more as it moves down
    12 Jun 2013, 02:53 PM Reply Like
  • Unless the price goes to zero what! The problem. Assume they reduce div to 10 per cent, where will you beat it. If you need the money in next few years sell. If not hold,keep getting good divs and ride it out
    12 Jun 2013, 02:54 PM Reply Like
  • I am truly befuddled by all the short term selling in the REITs rather than longer term investor fortitude. First, it is a good thing if long term interest rates and mortgage rates rise on a gradual basis especially with a steeping of the yield curve. This means that that any marginal growth in the REIT portfolios will increase the net interest margin. Yes, I understand that the current MBS' are of lower mark to market value but these losses are unrealised until sold. Proper hedging will mitigate this risk and higher rates will lower the pre-payment speed of the existing mortgages depending upon their seasoning and demographics. Smart management's duty is to manage and hedge the interest rate, pre-payment and any default risk of the portfolio. They will never get it perfect because there are no perfect hedges for the mortgage portfolio or consume behaviour.


    I am a retiree and taking all interest income not used for living and re-investing in REITs and MLPs. It is essentially dollar averaging in the cheap cycle of the economy. I will protect my portfolio in the upcoming crash with all the negatively correlated ETFs and many instruments now available to the retail customer.


    I am worried that Congress will mess up the mortgage marketplace structure, housing interest deduction and REIT regulations not understanding there is no place to get reasonable income.


    Lastly, I ask all the pundits pushing top name stocks that have a 'high' 3-4% dividend yield vs the REITs. It does not work for someone in their later years. Great if you intend to get the capital appreciation on your stock when you die...certainly can enjoy all those capital gains in my grave or rather those remaining heirs thanking their dearly beloved ones for leaving them all those capital gains.


    As for me, " I am a current dividend and income junkie!" I can not enjoy capital gains when I am dead!
    12 Jun 2013, 03:04 PM Reply Like
  • "MadProfit is right on! Isn't it amazing all the so-called "stick-it-out" folks on Seeking Alpha that are now jumping ship the first time in a while the mReits are taking a hit. Fair-weather friends for sure! We retirees need income stream. Advisors, show a little fortitude when the times get tougher.
    12 Jun 2013, 03:34 PM Reply Like
  • What a bunch of scaredy cats. In a few months you're all going to be wishing you weren't so fearful during a great buying opportunity.
    12 Jun 2013, 05:10 PM Reply Like
  • What you are seeing is a panic, by the low information investor and the uninformed who look at this as a tradeable equity. It is a machine for producing income. Those who need/want income are not selling.
    13 Jun 2013, 12:13 AM Reply Like
  • The BV / stock market declines are mainly based on the "speculation" the FED is exiting the QE 3 program. As such, mortgage interest rates jumped 50+ basis points and existing MBS prices materially declined (b/c the creator of the "artificially suppression of interest rates" is finally leaving the market". Again, I don't feel they will completely leave for some time to come.


    I mention as such in the following articles:




    In regards to some mREITs keeping their dividend rate the same and still getting hit with a stock price decline, the amount of the dividend directly affects BV. The higher the dividend, the higher the amount distributed to shareholders that directly affects the reduction of book value through their stockholder's equity.


    Even though AGNC has a large cash balance, if the div. was kept at $1.25 1) the yield would be around 18% of current BV (higher than most recent ROE %'s) and 2) their estimated cumulative UTI surplus would be wiped out within 2 quarters of weak performance. It took the company 3+ years to accumulate such a balance. They cut rates in Q1 2012 when they had a current dividend distributions ratio of 0.57. As of 3/31/2013, it was back down to only a factor of 0.86 . The quarter before (12/31/2012) it was at a factor of 1.76. The 0.90 ratio decrease was very negative. Since Q2 is shaping up to be at least the as Q1 (weak), this factor is already going to be decreasing. They are usually more cautious in nature when it comes to this figure; hence why I feel a cut this quarter is likely. Any dividend cut is directly beneficial to book value ($0.25 per share dividend cut equals a $.025 direct increase to BV).


    My article linked below discusses these facts (amongst discussing my personal Q2 dividend estimate):



    I agree, the market has "over-speculated" about the rates. As such, these rates will not continue to climb at the rates we have seen these past 4 weeks. These interest rate "spikes" have yet to fully hit the broader market/economy. Eventually, a flattening of rates will occur, which will stabilize overall MBS prices (AGNC's asset valuations). As such, BV will stop declining.


    I can't put an exact timetable on this projection, but these general trends will eventually occur. Since AGNC has already begun to “re-roll” its portfolio in higher-yielding MBS, once rates stabilize and even slow in their rise upwards, the entire mREIT sector will benefit from higher net spread income amounts.


    This is why I’m still long AGNC.
    13 Jun 2013, 01:11 AM Reply Like
  • Ever been through an interest rate increase cycle? I have been through many over the past 35-years of investing. Many of the cycles lasted a number of years and that was without the current high levels of manipulation by the Fed. The stabilization of BV could take years as well. Probably going to feel like being waterboarded. I am here for the dividend so will bite down hard and try to overcome my urges to sell my positions.
    23 Jun 2013, 02:17 PM Reply Like
  • ka12345,


    There's a big difference between a gradual rising in interest rates over an extended period of time and what has occurred over the past 6 weeks. mREITs can better position their portfolios on a gradual rise. Yes, book value won't shoot back up, but it can increase in a gradual rising interest rate environment. The current problem is the "spike" in rates (hence the material MBS devaluations).


    The average 15 + 30 fixed mortgages have had a .75% rate increase over 6 weeks. On a percentage basis, this is almost a 25% increase in rates. You think this won't have an impact on the economy in the coming months? This rapid rise can't last for an extended period of time. The market is trying to set a rate that would be in-line if the FED hadn't entered via the QE purchasing program. It's will near that level in the coming months, if not sooner.


    Also, if the FED funds won't be changing anytime soon, rates have to flatten out after this short-term panic. Also, the global markets aren't pumping on all cylinders either.
    24 Jun 2013, 08:24 AM Reply Like
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