Steady Dividend Payout at AGNC - Analyst Blog
22 June 2011 - 12:00AM
Zacks
American Capital Agency
Corp. (AGNC), a leading real estate investment trust
(REIT) that focuses on investments in mortgage pass-through
securities and collateralized mortgage obligations (CMOs), has
recently declared second quarter 2011 dividend of $1.40 per share.
American Capital has historically paid a steady dividend over the
years and has a unique distinction of being one of only a few
companies to have even increased its dividend during the economic
downturn.
The current dividend payout has
been kept unchanged from that of the first quarter and equates to a
total dividend of $16.06 per share since its initial public
offering in May 2008. Shares of American Capital began trading on
NASDAQ on May 15, 2008. The company sold 10 million shares at an
initial offering price of $20.00 each.
About 5 million shares were
privately placed at the offer price by the company’s external
manager which owns 33% of the shares. American Capital is
externally managed by American Capital Agency Management, a wholly
owned subsidiary of American Capital Strategies,
LTD (ACAS), a $37 billion publicly traded asset management
company.
American Capital invests only in
fixed-rate agency securities where payments are guaranteed by the
U.S. government or government-owned entities, such as
Fannie Mae (FNMA), Freddie Mac
(FMCC) and Ginnie Mae. Specifically, American Capital invests in
FMCC Gold certificates, FNMA certificates, and Ginnie Mae
certificates.
With the government takeover of
FNMA and FHLMC, American Capital’s securities now have an explicit
government guarantee, which makes it a much more attractive
prospect for investors. Additionally, the company’s portfolio of
government-backed assets is relatively liquid and credit risk is
limited.
Furthermore, American Capital
purchases payer swaptions to protect against lower interest rates
that might lead to early prepayment of the mortgages. This measure
ultimately facilitates the company to continue making money by
collecting premium and ensures a steady revenue stream.
We maintain our ‘Neutral’ rating on
American Capital, which presently has a Zacks #3 Rank that
translates into a short-term ‘Hold’ rating, indicating that the
stock is expected to perform in line with the overall U.S. equity
market for the next 1–3 months.
AMER CAP LTD (ACAS): Free Stock Analysis Report
AMER CAP AGENCY (AGNC): Free Stock Analysis Report
FREDDIE MAC (FMCC): Free Stock Analysis Report
FANNIE MAE (FNMA): Free Stock Analysis Report
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