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American Capital Agency call: Lower income doesn't necessarily mean dividend cut

Apr. 26, 2016 2:38 PM ETAGNC Investment Corp. (AGNC) StockAGNCBy: Stephen Alpher, SA News Editor12 Comments
  • The company last night reported net spread and dollar roll income of just $0.52 per share - that's down from $0.54 in Q4 and stands against the dividend rate of $0.60. It has some speculation about a forthcoming cut in the payout.
  • Management isn't in the habit of giving dividend guidance, but CEO Gary Kain in the past has discussed the shortcomings of net spread income, and doesn't view it as expressing the "true earnings power of the portfolio."
  • He notes that buybacks done at discounts to book value boost earnings power as do narrowing mortgage spreads (which the company expects). Also funding costs are expected to improve.
  • There's also leverage, and while it rose to 7.3x from 6.8x during the quarter, the company sees the bias as towards a level closer to 8x, though don't expect to get there too quickly.
  • AGNC -2.3%
  • Now read: American Capital Agency's (AGNC) CEO Gary Kain on Q1 2016 Results - Earnings Call Transcript (April 26)

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