American Capital Cements Prospects As Compelling Investment In 2015
- American Capital is correctly targeting aggressive portfolio composition strategy in prevailing low rate environment.
- Initiatives to increase 30-year MBS portfolio and reduce hedges will augur well for EPS in 2015.
- Company offers sustainable and impressive yield of 12.1%.
American Capital Agency's Upcoming Q4 2014 Earnings Projection - Part 3
- Most 15- and 30-year fixed-rate agency MBS coupons saw a modest to material price increase during the fourth quarter of 2014.
- As such, I am projecting AGNC will report a net unrealized gain on available-for-sale securities of $550 million for the fourth quarter of 2014.
- I am projecting AGNC will report a net unrealized gain on interest rate swaps (upon reclassification to interest expense) of $36 million for the fourth quarter of 2014.
- My projection for AGNC’s comprehensive income (loss) amount for the fourth quarter of 2014 is stated in the “Conclusions Drawn” section of the article.
- A future article, which will be published prior to AGNC’s quarterly press release, will project the company’s BV as of 12/31/2014 and 1/23/2015.
American Capital Agency Stock Price Remains Steady With Excellent Dividend Yield
- Dividend has remained constant at $0.22 per share, with a yield of over 12%.
- The stock price has remained constant with the market’s volatility.
- When interest rates do rise, there is an opportunity for higher profit margins.
American Capital Agency's Upcoming Q4 2014 Earnings Projection - Part 2
- I am projecting AGNC will report a material loss on derivative instruments and other securities for the fourth quarter of 2014.
- I am projecting AGNC will report a relatively unchanged management fees expense for the fourth quarter of 2014.
- My projection for AGNC’s net income (loss) and earnings per share amounts for the fourth quarter of 2014 are stated in the “Conclusions Drawn” section of the article.
- Part 3 of the article will project the remaining accounts that make up AGNC's other comprehensive income (loss) and total comprehensive income (loss) amounts which directly affect BV.
I Have Concerns Regarding American Capital Agency After The Dividend Announcement
- American Capital Agency, one of my favorite mortgage real estate investment trusts, has just declared its first monthly dividend payment of 2015.
- Why didn't the company announce book value?
- I discuss three pressing concerns that may impact my bullish call.
American Capital Agency's Upcoming Q4 2014 Earnings Projection - Part 1
- I am projecting AGNC will report a slight decrease in interest income for the fourth quarter of 2014 when compared to the prior quarter.
- I am projecting AGNC will report a slight increase in interest expense for the fourth quarter of 2014 when compared to the prior quarter.
- I am projecting AGNC will report a slightly higher net gain on the sale of agency securities for the fourth quarter of 2014 when compared to the prior quarter.
- Part 2 of the article will project the remaining accounts that make up AGNC's net income (loss) amount (mainly the quarterly valuation changes in the company’s derivative portfolio).
- Part 3 of the article will project the remaining accounts that make up AGNC's other comprehensive income (loss) and total comprehensive income (loss) amounts.
Comparing American Capital Agency's Recent BV, Dividend, Risk And Valuation To Several mREIT Peers - Part 2
- While AGNC had a slight dividend per share rate increase during the fourth quarter of 2014, most of the company’s mREIT peers declared a stable dividend.
- AGNC and NLY continued to have yield percentages modestly below the agency mREIT average thus inherently lowering the risk of dividend reductions going into 2015.
- ARR continued to have yield percentages modestly above the agency mREIT average thus inherently raising the risk of dividend reductions going into 2015 (which recently came to fruition).
- Even though WMC and NYMT continued to have yield percentages materially above the hybrid/multipurpose mREIT averages, both companies have unique business models which need to be considered regarding dividend sustainability.
- My current buy, sell, or hold recommendation and dividend sustainability projection on each mREIT company within this analysis is stated in the “Conclusions Drawn” section of the article.
- Rates will remain low longer than anticipated by the market.
- AGNC will continue to take advantage of low interest rates and adjust its portfolio accordingly when the rates finally rise.
- TWO retains potential for significant price appreciation.
12% Dividend American Capital Agency Already Has A $0.20 Book Value Gain In Q4 2014
- AGNC pays a great 12% dividend.
- The book value has gone up by $0.20 (about 0.78%) through the first two months of Q4 2014.
- Using the eleven month book value gain in 2014 and the dividend for FY2014, the total economic return is about 18.5% for FY2014.
- The stock price would have to rise 15%+ to get to the book value as of November 30, 2014. There is upward potential.
American Capital Agency: A 26% Total Return For 2014
- AGNC declares a $0.22 per share dividend for December 2014.
- This marks the third straight monthly dividend at this level.
- At current prices, yields 12% and trades at a 15% discount to its estimated NAV per share.
Update: American Capital Agency Declares Its Latest Dividend - Why I'm A Buyer Here
- American Capital Agency has just declared its third monthly dividend payment.
- I predicted the dividends would be maintained but book value is the larger story.
- The present news is bullish and I am a buyer at these levels.
Comparing American Capital Agency Corp.'s BV, Dividend, Risk, And Valuation To Several mREIT Peers
- Even though AGNC reported a minor decrease in BV during the third quarter of 2014, the company reported a trailing nine-month increase in BV near the top of the sector.
- AGNC continued to increase the company’s proportion of 30-year fixed-rate agency MBS holdings during the third quarter of 2014 which will increase BV in the fourth quarter of 2014.
- Furthermore, AGNC modestly decreased the company’s hedging coverage ratio from 88% to 76% during the third quarter of 2014 which will increase BV during the fourth quarter of 2014.
- As of 11/28/2014, AGNC, ARR, and NLY traded at or near material discounts to BV as of 9/30/2014 while WMC and NYMT traded at minor and material premiums, respectively.
- My current BUY, SELL, or HOLD recommendation for AGNC and each company analyzed will be in the “Conclusions Drawn” section of this article.
American Capital Agency Corp.: Is Now A Good Time To Buy This Mortgage REIT?
- American Capital Agency's shares already returned 21% so far in 2014.
- The mortgage REIT trades at a persistent net asset value discount and at an (historically) appealing P/B ratio.
- Capital gains potential could boost investors' total returns.
- Book value momentum likely to be a major catalyst for American Capital Agency's share price in 2015.
Annaly Looks To Increase Commercial Portfolio As Stock Continues To Offer Attractive Total Return
- The company has the option to increase its investment portfolio as it sees attractive opportunities in the MBS space due to lower leverage.
- NLY has added grocery-anchored shopping centers to its commercial portfolio and is eager to take commercial portfolio to 25% of equity.
- Investments to boost asset yield are very important to increase core EPS and cement the sustainability of its dividends.
- Fed will also keep interest rates low, as the economy is not strong enough to support the end of the expansionary monetary policy.
American Capital Solidifies Attractive Credentials With Double-Digit Dividend Yield And Price Appreciation Potential
- Company has done right by lowering hedge position and investing in high-yielding assets to take advantage of low interest scenario.
- Jobs report for last month was mixed as labor force participation rate improved, but growth in wages was not strong enough.
- Fed will keep rates low until impact of recession completely eliminated from economy.
- Stock offers dividend yield of 11.70% and potential for price appreciation of 6%.
Update: American Capital Agency Announces November Dividend, Our Raise Confirmed
- American Capital Agency has just declared its second monthly dividend payment of $0.22 and book value rose.
- When I last covered American Capital Agency in depth, I predicted that the dividend cuts were over and that the company was committed to keeping its payout steady.
- This news is very welcomed and I remain bullish on the company and the stock moving forward.
American Capital Agency's Dividend Projection For November - December 2014
- AGNC reported ERTI and net dollar roll income available to common shareholders of $237 million (or $0.67 per common share) for the third quarter of 2014.
- AGNC had a quarterly ERTI and net dollar roll underpayment (overpayment) of $8 million and a quarterly payout ratio of 97%.
- My exact AGNC dividend per share projections for November 2014 and December 2014 are stated in the “Conclusions Drawn” section of the article.
- My exact MTGE and NLY dividend per share projections for the fourth quarter of 2014 are stated near the end of the article.
- My current buy, sell, or hold recommendation for AGNC, MTGE, and NLY is stated in the “Conclusions Drawn” section of the article.
A So-So Q3 For 11.7% Dividend American Capital Agency Still Leaves It Looking Good
- AGNC raised its dividend for Q4 2014 to $0.66 (11.7% annually). It also moved to a monthly dividend ($0.22 per month).
- AGNC lost $0.72 per share in book value in Q3 2014; but its overall total economic gain in for Q1-Q3 2014 has been 14.9%.
- CIO Gary Kain believes the expected to be muted near term interest rate environment should be a good one for AGNC.
How American Capital Agency Corp. Controls The Cost Of Capital: A Primer On Swaps And Repurchase Agreements
- American Capital Agency Corp.’s interest rate swaps have a reasonable maturity.
- The average rate paid under the interest rate swaps is in line with the maturity.
- AGNC does very well at limiting the interest rate they pay out under the terms of repurchase agreements.
- The notional value of interest rate swaps feels high relative to the value of outstanding repurchase agreements.
- There's little to like about the mortgage REIT industry.
- We don't think the individual investor should be dabbling in shares of American Capital or any other mortgage REIT, for that matter.
- Let's take a look at American Capital's third-quarter performance.
Sat, Jan. 24, 8:25 AM
- In a low-yield world, the newly launched iBillionaire High Dividend Index - which tracks the trading moves of 25 investing-savvy billionaire investors such as Stanley Druckenmiller, James Dinan and Nelson Peltz - actually lives up to its name with a dividend yield of 5.34%.
- At 24%, the index has a high allocation of energy shares, including OXY, TRP, CNP, COP, BP, ATLS, CVI, WMB, APL, RIG and ARP.
- Also worth noting is that the index contains some high-yielding mortgage REITs, an area most investors hate right now but where billionaires seem to find value; examples are NRF, AGNC and CIM.
- No mutual fund or ETF tracks this index, but it offers a fishing pond of income investment ideas to research further.
- The top 20 holdings: TLM, CVC, GM, TIME, AEE, D, STAY, KMI, TROX, EXC, STNG, PPL, IRM, PFE, KKR, KAR, F, MIC, LO, ABBV.
Tue, Jan. 20, 3:13 PM
- Borrowers struggling to navigate D.C.'s qualified mortgage rules might try ringing their local mortgage REIT for that refinance or new home mortgage.
- “There is demand out there for a broader credit box than what banks are providing," says JMP mREIT analyst Steve Delaney. “They’re looking at where the needs are, at borrowers in the market where funding is not available."
- Western Asset Mortgage (WMC -1.4%) is partnering with lenders to make loans which otherwise wouldn't qualify under the new standards. This lending will focus on borrowers with strong credit, but are shut out for complications surrounding things like being self-employed,
- Zais Financial (ZFC -0.1%) last year bought mortgage originator GMFS to get a pipeline to new loan supply, and Two Harbors (NYSE:TWO) has recently begun working with lenders to offer loans to those with less than stellar credit, or for those who want to make smaller down payments on jumbo loans (above the conforming $417K figure). “There continues to be a huge national cohort of people able to responsibly purchase a home that simply haven’t been able to get a mortgage,” says CEO Tom Siering.
- Ellington Financial (EFC) - a partnership, but operates similarly to a REIT - has invested in at least two lenders and built out its team to find non-QM business. “These will be relatively small investments to start with, but they should have the potential to generate a large pipeline of new investments for us, especially in the non-QM, non-prime space,” says CEO Larry Penn.
- Not all are getting involved. American Capital's (AGNC -1.7%) Gary Kain is waiting to see how others fare before stepping in.
Thu, Jan. 15, 4:15 PM
Wed, Jan. 14, 1:17 PM
- Agency MBS are off to their worst start relative to Treasurys since 1997 as the big drop in interest rates has investors nervous about a surge in refinancing. Returns on paper backed by Fannie, Freddie, or Ginnie Mae are 60 basis points less than those on Treasurys of similar duration so far this month.
- Also stoking the trend are changes to government programs aimed at making mortgage credit easier to obtain.
- Earlier today, the MBA reported applications for home-loan refis jumped 66% last week.
- Prices of agency MBS currently average 106.5 cents on the dollar, meaning owners would lose 6.5% if immediately repaid.
- Annaly Capital (NLY -1.3%), American Capital Agency (AGNC -1.2%), Armour Residential (ARR -2%), Two Harbors (TWO -0.9%), Invesco Mortgage (IVR -1.9%), American Capital Mortgage (MTGE -1.3%), Dynex (DX -0.5%), Apollo Residential (AMTG -1.2%), Anworth (ANH -0.9%), Western Asset (WMC -1.6%).
- ETFs: REM, MORT, MORL
Mon, Jan. 12, 10:03 AM
- The mortgage REIT space (REM -0.6%) is cut to Market Weight from Overweight at Wells Fargo, with Annaly Capital (NLY -0.4%), American Capital Agency (AGNC -0.2%), CYS Investments (CYS -0.7%), Capstead Mortgage (CMO -0.8%), American Capital Mortgage (MTGE -0.5%), AG Mortgage (MITT -1.3%), and MFA Financial (MFA -0.3%) - for now - individual names also being cut to Market Weight.
- It's an interesting move, especially in light of the significant discounts to book value nearly every stock in the sector trades at. The mortgage REITs have been especially notable of late for not being able to make any headway alongside the big rally in bond prices. Lower rates might do something for book values, but the sharply flatter yield curve (which could flatten even more once the Fed begins hiking) doesn't bode well for earnings power.
- Other ETFs: MORT, MORL
Tue, Jan. 6, 2:17 PM
- The 10-year yield has plunged all the way down to 1.94% and one would figure on some nice increases in book value for the mortgage REITs (REM -0.1%), but on the flip side are narrowing interest rate spreads (especially as the Fed still seems to be intent on hiking short rates), and what hedging losses the companies are taking.
- Other ETFs: MORT, MORL
- Individual names: Annaly Capital (NLY +0.4%), American Capital Agency (AGNC), Armour Residential (ARR -1%), CYS Investments (CYS -0.2%), Invesco Mortgage (IVZ -2.7%), New York Mortgage Trust (NYMT -0.5%), Hatteras Financial (HTS -0.3%), Western Asset Mortgage (WMC -2.7%), Ellington Residential (EARN -0.4%), Javelin Mortgage (JMI -3%).
Dec. 30, 2014, 12:37 PM
- Nearly all the mREITs sell at discounts to their most recently disclosed book value, with sector giants Annaly Mortgage (NYSE:NLY) and American Capital Agency (NASDAQ:AGNC) trading at double-digit discounts.
- Often a sizable haircut to book may make sense, as in the case of Armour Residential (NYSE:ARR) and Javelin Mortgage (NYSE:JMI), both of which just cut their dividend (they have the same external manager).
- Of the 24 companies examined, New York Mortgage Trust (NASDAQ:NYMT) and Capstead Mortgage (NYSE:CMO) stand alone in trading at premiums to book value.
- The full list
Dec. 15, 2014, 4:07 PM
Dec. 9, 2014, 12:57 PM
- Unable to catch a bid for a few sessions, mortgage REITs (REM +1%) have turned higher in afternoon action, led by Annaly (NLY +0.7%) and American Capital Agency (AGNC +1.5%).
- Helping are jitters in the stock market (though U.S. averages are well off the lows), and a 10-year Treasury yield that's retreated all the way to 2.21% after hitting the mid-2.30s on the back of Friday's strong jobs number.
- Armour (ARR +1.1%), Two Harbors (TWO +0.9%), CYS Investments (CYS +1.4%), Invesco (IVR +1.8%), American Capital Mortgage (MTGE +1%), Hatteras Financial (HTS +2%), Capstead (CMO +2%).
- Other ETFs: MORT, MORL
- Also showing some green are the recently beaten-up BDCs, including Prospect Capital (PSEC +0.2%), Fifth Street Finance (FSC +0.2%), Ares Capital (ARCC +0.5%), FS Investment (FSIC), Triangle Capital (TCAP +1.7%).
- ETFs: BDCL, BDCS, BIZD
- Previously: Money flows back into fixed income (Dec. 9, 2014)
Dec. 5, 2014, 10:12 AM
- This morning's big jobs number has pushed yields higher at both the short and long end of the curve, and has mortgage REIT investors mulling losses on MBS holdings.
- The mREIT ETF (REM -0.6%) Others: MORT, MORL
- Annaly (NLY -1.2%), American Capital Agency (AGNC -1%), Armour Residential (ARR -0.6%), Chimera (CIM -0.6%), MFA Financial (MFA -0.9%), Western Asset (WMC -1.3%).
- Previously: Short end of yield curve on the move after jobs number (Dec. 5, 2014)
- Previously: Bonds and dollar higher, gold slumps after strong jobs report (Dec. 5, 2014)
Nov. 19, 2014, 3:42 PM
- A check of the mortgage REITs following FOMC minutes which shows the discussion moving a bit more seriously towards rate hikes finds the sector (REM -0.5%) modestly lower.
- Individual names: Annaly (NLY -0.3%), American Capital Agency (AGNC), CYS Investments (CYS -0.3%), Invesco Mortgage (IVR -0.9%), New York Mortgage Trust (NYMT -0.4%), Hatteras Financial (HTS -0.8%), MFA Financial (MFA -1%), Capsteam Mortgage (CMO -0.6%), Ellington Residential (EARN -0.4%).
Nov. 17, 2014, 4:03 PM
Oct. 29, 2014, 1:43 PM
- Fed purchases of mortgage-backed securities are ending today, but reinvestments are likely to keep a firm bid in the market, says Deutsche's MBS team. The "real risk" to the MBS market won't come until the Fed ends reinvestments - early 2016 at the soonest, and maybe not until 2017.
- QE's end, says the team, leaves the Fed with $1.7T in MBS holdings and private investors with just $3.5T. The Fed's massive holdings - 1/3 of the universal amount, but 1/2 of dollar duration - keep a source of volatility out of the market.
- The end of the Fed as a net buyer will be about the first time since the early 1990s when MBS haven't been getting a bid from either the GSEs, Treasury, or Fed.
- ETFs" REM, MORT, MORL
- Names of interest: Annaly (NLY -1.6%), American Capital Agency (AGNC -2.5%), Armour (ARR -1.2%), Hatteras (HTS -1.6%), CYS Investments (CYS -1.7%)
Oct. 28, 2014, 11:31 AM
- "We expect those changes to be at the margin," says American Capital Agency (AGNC -0.6%) CIO Gary Kain, speaking on the earnings call about recent loud headlines suggesting the GSEs are about to sharply ease credit/down payment standards for mortgages. Kain doesn't see some of the changes being talked about as materially affecting the mortgage market.
- Webcast and presentation slides
- He describes current mortgage market conditions as right in company management's wheelhouse - i.e., more active portfolio management is a must.
- Previously: American Capital Agency beats by $0.10
- Previously: American Capital agency book value slips in Q3
Oct. 27, 2014, 4:18 PM
- Q3 net spread and dollar roll income of $0.85 vs. $0.87 in Q2. Quarterly dividend was $0.65..
- Net book value per share of $25.54 down 2.7% from the end of Q2. Today's close of $23.20 is a 9.2% discount to book. Decrease in book value combined with dividend makes for an annualized 1.1% economic loss for the Q.
- CPR of 10% up 100 basis points from Q2.
- "At risk" leverage of 6.7x vs. 7.1x in Q2.
- Net interest rate spread of 1.9% up six basis points from Q2.
- No shares repurchased during quarter. Buyback program ($992M remaining) is extended through year-end 2015.
- Conference call tomorrow at 11 ET
- Previously: American Capital Agency beats by $0.10
- AGNC -0.4% AH
Oct. 27, 2014, 4:03 PM
AGNC vs. ETF Alternatives
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