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.
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. 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)
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%).
Oct. 13, 2014, 4:19 PM
- Both equity and mortgage REITs saw plenty of buying as nearly all of the rest of the market was lit up bright red, and Treasury ETFs signaled a sharp drop in yields when government bonds reopen for trade tomorrow (closed this session for Columbus Day).
- A sampling of equity names: Senior Housing Properties (SNH +1.2%), Medical Properties Trust (MPW +1.4%), Gramercy Property Trust (GPT +1.7%), Equity Residential (EQR +0.7%), Inland Real Estate (IRC +0.9%), Sovran Self Storage (SSS +1.1%), Highwoods Properties Trust (HIW +1%).
- One equity REIT sector in the red along with the rest of the market is lodging amid worsening Ebola fears: Ashford Hospitality Trust (AHT -2.9%), Sunshine Hotel Investors (SHO -1.4%), LaSalle Hotel Properties (LHO -1.5%), Summit Hotel Properties (INN -1.5%).
- Mortgage REITs: American Capital Agency (AGNC +1.4%), CYS Investments (CYS +2.2%), Invesco (IVR +1.1%), American Capital Mortgage (MTGE +1.5%), Western Asset (WMC +1.1%).
- ETFs: IYR, VNQ, REM, MORL, MORT, DRN, URE, REZ, SRS, RWR, SCHH, ICF, ROOF, DRV, KBWY, RTL, REK, FRI, FTY, PSR, IFNA, FNIO, WREI
Oct. 9, 2014, 10:40 AM
- It's been a good week for mortgage REITs (REM +0.7%) which rose on Tuesday as the broad market tumbled and brought yields down with it, rose more on Wednesday, this time alongside a major broad market rally on dovish FOMC minutes, and are on the move higher again today as the averages again head south.
- Down to 2.28% earlier in the session (a 16-month low), the 10-year Treasury yield is now flat on the day at 2.32%.
- This week's strong move comes following a tough September in which the mREITs gave back a nice chunk of their YTD gains.
- Annaly (NLY +1.2%) is up nearly 5% over the last four sessions. American Capital Agency (AGNC +1.5%) is ahead more than 6%.
- Others: Armour (ARR +1%), Chimera (CIM +1%), CYS Investments (CYS +1.2%), New York Mortgage (NYMT +1.3%), Anworth (ANH +0.8%), Dynex (DX +1%), Javelin (JMI +1.5%), Five Oaks (OAKS +0.9%).
- Other ETFs: MORT, MORL
Oct. 7, 2014, 11:12 AM
- Sector giants Annaly Capital (NLY +1.2%) and American Capital Agency (AGNC +1%) are pacing gains in the mortgage REIT sector (REM +0.3%) on a day when the major averages are lower by about 0.75% and the 10-year yield at 2.39% has about erased all of its big post-Labor Day gain.
- Additional ETFs: MORT, MORL
- Among other names, there's CYS Investments (CYS +0.5%) - whose management has been the most publicly skeptical of the higher interest rates meme.
Sep. 19, 2014, 3:32 PM
- Leading the mREIT sector (REM +0.2%) higher this session are American Capital Agency (AGNC +1.9%) and American Capital Mortgage (MTGE +1%) after the two maintained their $0.65 per share quarterly payout last night. Neither move should have been a surprise as both comfortably out-earned their dividend last quarter.
- Also maintaining its payout ($0.30 per shares) after the bell yesterday was Annaly Capital (NLY +0.8%).
- The sector is also getting a break from rising rates with the 10-year Treasury yield lower by four basis points to 2.58%
- ETFs: MORT, MORL
Sep. 18, 2014, 1:10 PM
- The entire sector is in the red, but the biggest declines are being seen in the industry giants, about the only spots large investors can move a lot of shares quickly: Annaly Capital (NLY -1.6%), American Capital Agency (AGNC -1.6%).
- Yesterday's FOMC statement may have left in the "considerable period" language, but the committee remains on course to begin a rate hike cycle in less than a year.
- Further, the selloff on the long end of the curve can has reached the sizable stage - the 10-year yield is up 32 basis points in a month, and has now erased about all of the summer's decline. Book values could take a hit (though hedging is likely to ease the pain).
- REM -0.7%
- Other ETFs: MORT, MORL.
- Other names: Armour (ARR -1.3%), Invesco (IVR -0.7%), Hatteras (HTS -3%), Capstead (CMO -0.3%), Western Asset (WMC -0.4%)
Sep. 17, 2014, 2:51 PM
- Another $10B taper this month brings QE to just $5B monthly, an amount the FOMC expects to go down to zero with its next policy meeting. The "dots" shifted somewhat higher - meaning maybe a slightly earlier start to Fed rate hikes and a higher level of Fed Funds at the end of the next few years, with the median forecast being 2.9% at the end of 2016.
- Mortgage REITs (REM +0.2%) have been under pressure in the sessions ahead of the FOMC, and are mostly snoozing through today's news.
- Annaly (NLY -0.1%), American Capital Agency (AGNC +0.1%), CYS Investments (CYS +0.2%), New York Mortgage Trust (NYMT +0.5%), Dynex (DX +0.8%), Ellington Residential (EARN +1.2%), Javelin (JMI +1.3%).
- Previously: FOMC statement and projections lean hawkish
- Previously: Yellen press conference: Falling UE rate still masking labor market weakness
Sep. 2, 2014, 2:26 PM
- REITs and other so-called "shadow bankers" for the last several years have used captive insurers to join Federal Home Loan Banks, thus getting access to more dependable financing and better terms than they otherwise could.
- The FHFA for some time has voiced its concern over the practice, and under new rules just proposed, would sunset those existing memberships over a five year period.
- ETFs: REM, MORT, MORL
- Two Harbors (TWO -1.8%), Invesco Mortgage (IVR -1.9%), Hatteras Financial (HTS -1.2%), Dynex Capital (DX -1.1%), PennyMac Mortgage (PMT -1.5%), Annaly Capital (NLY -0.8%), American Capital Agency (AGNC -0.3%).
Jul. 28, 2014, 4:16 PM
- Net spread and dollar roll income of $0.87 per share compares $0.71 in Q1, and to the $0.65 dividend.
- Book value per share of $26.26 up 7.2% from June 30 book value of $24.49. Today's close of $23.69 is a 9.8% discount to book. Dividend plus boost in book value translates to 9.9% economic ROE for Q2.
- CPR of 9% up 200 basis points from Q1.
- Net interest spread of 1.84% up 25 basis points from Q1.
- Average "at risk" leverage of 7.1x vs. 7.2x in Q1.
- CIO Kain takes a victory lap: "Our results this quarter were bolstered by several important strategic decisions ... Most important was our decision to maintain our leverage as we believed the supply and demand outlook for agency MBS was very positive despite the tapering of Fed purchases."
- Conference call tomorrow at 11 ET
- AGNC +1.3% AH
- Previously: American Capital Agency beats by $0.19
Jul. 10, 2014, 10:17 AM
- Working today as both stock and bond yields fall in response to banking troubles in Portugal are both equity and mortgage REIT names.
- Leading in the mortgage REIT sector are Annaly (NLY +0.8%) and American Capital Agency (AGNC +0.8%), and a sampling of equity REIT names: Realty Income (O +0.6%), Omega Healthcare (OHI +1%), Ventas (VTR +1.2%), Medical Properties (MPW +1%), Avalon Bay (AVB +0.5%), Simon Property (SPG +0.8%), Boston Properties (BXP +0.8%)
- ETFs: IYR, VNQ, DRN, URE, SRS, ICF, RWR, SCHH, DRV, KBWY, REK, FRI, FTY, PSR, FNIO, WREI, REM, MORL, MORT
Jul. 3, 2014, 9:56 AM
- A few days ago, the 10-year Treasury yield stood at about 2.50%, but it's been on the rise all week and shot up to near 2.7% this morning following the strong jobs print and drop in unemployment to 6.1%. Checking the short end of the curve, Eurodollar futures are selling off as well, and now have baked in more than one rate hike between now and one year from now, and 75 basis points of hikes by the end of 2015.
- Previously: Treasury yields jump, gold slumps after strong jobs print
- Off 1.1% today, Annaly Capital (NLY) is down nearly 5% since this time last week, with a similar move having taken place in American Capital Agency (AGNC -1.2%).
- Chimera (CIM -1.4%), CYS Investments (CYS -1%), Invesco Mortgage (IVR -1.8%), American Capital Mortgage (MTGE -1.6%), New York Mortgage Trust (NYMT -1.2%), AG Mortgage (MITT -1.8%), Ellington Residential (EARN -0.7%), Dynex (DX -0.8%), MFA Financial (MFA -0.9%).
- ETFs: REM, MORT, MORL
Jun. 26, 2014, 3:54 PM
- Enjoying the decline in interest rates even among some hawkish stomping of feet by St. Louis Fed boss Jim Bullard, the mortgage REIT sector (REM +0.9%) is broadly higher. Sector giants: Annaly Capital (NLY +0.6%) and American Capital Agency (AGNC +1.1%).
- Others: Two Harbors (TWO +1.9%), Chimera (CIM +1.8%), American Capital Mortgage (MTGE +1%), Cherry Hill Mortgage (CHMI +1.4%), New York Mortgage Trust (NYMT +1.1%).
- Other ETFs: MORT, MORL
Apr. 29, 2014, 11:33 AM
- It's hard to get worked up about the taper upsetting the supply/demand picture in MBS this year, says American Capital Agency (AGNC -0.9%) CIO Gary Kain on the earnings call. Thanks to the slow pace of mortgage originations this year, 2014 will likely have the smallest pace of net MBS supply (gross supply minus Fed purchases) of any year this century (excepting the 2009 blowup). See presentation slides, page 12.
- Given these dynamics, says Kain, it's hard to make the argument that mortgages are overpriced at the moment.
- Previously: CYS Investment's Kevin Grant says mortgages are too pricey and awaits a pullback.
- Next, Kain looks (page 13) at the changing investor base for MBS as the Fed has become the gorilla. Who's been selling? Everyone, but it's mostly money managers who have cut back while the Fed fattened up its holdings. As for mortgage REITs, they've not only cut back their holdings (account for less than 5% of the market), but they've reduced leverage too.
- Previously: American Capital beats estimates; grows book value
Apr. 25, 2014, 3:50 PM
- The mREITs (REM +0.2%) aren't as green as one might imagine given the pattern of buying the names on broad market selloffs seen so far this year, but sector giants and leaders Annaly Capital (NLY +1%) and American Capital Agency (AGNC +0.7%) have moved their highest levels of the year late in the session.
- The 10-year Treasury yield - off three basis points to 2.66% - is within a handful of ticks of its low point on the year. TLT +0.2%
- Other mREIT ETFs: MORT, MORL
- Previously: Sharp losses for small caps and tech; money flows into utilities
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