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More on American Capital Agency (AGNC) Q3 earnings: Book value of $32.49/share up from $29.41...

More on American Capital Agency (AGNC) Q3 earnings: Book value of $32.49/share up from $29.41 last quarter. Average asset yield dipped 18 bps to 2.55%, and cost of funds increased 5 bps to 1.13%, dropping net interest spread to 1.42% from 1.65%. Constant prepayment rate of just 9%, down 100 basis points from Q2, and maybe at or near an industry low. As reported earlier, the board tries to draw a line in the sand on the stock price, authorizing a $500M share repurchase - about 5% of the float. (PR)
Comments (12)
  • JayWright
    , contributor
    Comments (89) | Send Message
     
    Great for AGNC longs! Now if only the markets were open so I could sell once the price spikes!
    29 Oct 2012, 03:04 PM Reply Like
  • YellowLab1
    , contributor
    Comments (135) | Send Message
     
    Been long for a good while. Been my best performer over the last year. Remain long.
    No time now to look thru details of Q3 results but compared to poor earnings from most names the last two weeks overview of AGNC results appear to be stellar and stronger than almost anything I've seen in other sectors.
    29 Oct 2012, 03:12 PM Reply Like
  • piggysun
    , contributor
    Comments (113) | Send Message
     
    oh yeah!
    29 Oct 2012, 03:16 PM Reply Like
  • davisg39
    , contributor
    Comments (3) | Send Message
     
    Owned AGNC for about three years and have enjoyed the dividends and capital gains. My best performer during this time period.
    29 Oct 2012, 03:56 PM Reply Like
  • tcharp
    , contributor
    Comments (3) | Send Message
     
    I'm no expert, but read this as a good report. I see nothing to change my high opinion of these guys or these shares.
    29 Oct 2012, 05:13 PM Reply Like
  • Alpha_Vega
    , contributor
    Comments (10) | Send Message
     
    I just bought AGNC, I'm a bit worried that the earning expectation is $1.08 and actual is $0.25; thoughts?
    29 Oct 2012, 10:16 PM Reply Like
  • Alpha_Vega
    , contributor
    Comments (10) | Send Message
     
    I just bought into AGNC, I was a bit worried about the earnings estimates being $1.08 and actual coming in at $0.25, thoughts?
    29 Oct 2012, 10:16 PM Reply Like
  • pepe1996
    , contributor
    Comments (7) | Send Message
     
    I will continue to own agnc with to fact that 5.00 a share a year is very hard to beat.If you are cash heavy and need to preserve your capital it is still hard to beat!After saying that I watch this stock closely and will contiue to reap the benefits.
    29 Oct 2012, 10:16 PM Reply Like
  • Piero A.
    , contributor
    Comments (333) | Send Message
     
    This company is so well managed that will be a great performer over the next two years even in the face of QE3. The share buy back program will further increase book value. Looking back to the last share issuance that was a great move. For those that sold in a panic when QE3 was announced should take note. Panic selling is generally always a wrong move. Staying long is the best way to benefit from AGNC although if the shares ever rise to 20% above book value again I will sell and buy back when the shares come back down. I think this can easily happen if there is a dividend tax cut.
    30 Oct 2012, 12:56 AM Reply Like
  • Billy-the-Kid
    , contributor
    Comment (1) | Send Message
     
    Isn't anyone nervous about these numbers?
    30 Oct 2012, 02:06 AM Reply Like
  • ma1211rk
    , contributor
    Comments (2) | Send Message
     
    I'm in it for the dividend and as long as the stock still looks strong and healthy It should keep paying this dividend as long as the interest rate for borrowing remains the same. Once the spread is reduced, that's when I'll watch it more closely. Even if the dividend is cut in half it's still a respectable size.
    30 Oct 2012, 10:03 AM Reply Like
  • fkevin1029
    , contributor
    Comments (28) | Send Message
     
    I agree with Alpha_Vega and Billy-the-Kid: Earnings per share were $0.25 actual vs $1.12 expectation. Net spread is down. It is my opinion that management, seeing these results coming, offered the buyback program as a way to stem what they expected would be a steep selloff. In the short term I expect the shares to move lower because these numbers represent a huge miss, although the damage may be limited by the increase in book value and the related share buyback program.

     

    In the intermediate term I expect to see a reduction in the dividend, since earnings clearly won't support another quarter at $1.25, it isn't clear to me that there is enough existing undistributed taxable income to maintain the $1.25 dividend, and OCI will apparently be used for the share buyback program and not to cover dividends at the existing rate. Absent an increase in leverage, which is doubtful, or the issuance of new shares, which would now be ludicrous, the dividend has to fall.

     

    In the long term, the extent to which this business model can, under changing conditions, generate a stable, reliable dividend stream remains to be seen. Granted, 10% to 12% in the mREITs is better than the 3% to 5% available elsewhere, but the point is that if the days of 15% to 18% are gone, it would be nice to have a good idea what is going to follow them, and the answer isn't clear at this time.

     

    Furthermore, I think another mREIT has in this space recently been criticized for selling new shares in one quarter and then offering a share buyback program shortly thereafter, because it creates the impression of inconsistency. Since this is what AGNC has now done, I wonder about other reader's opinion of management: I think I understand why they committed to the buyback program, and yet it does raise the question. Thoughts?
    30 Oct 2012, 10:17 AM Reply Like
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