My High Dividend Stocks Blog

My High Dividend Stocks
This is my high dividend stocks site where I help site members find high dividend stocks with earning power and strong balance sheets.

Safe Bulkers (SB) reports Q12011 results and declares quarterly dividend.

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Safe Bulkers remains my favorite high dividend stock after its Q12011 results today.  Here is why.

Dividend Record: No change.  Safe Bulkers (SB) will pay its usual $0.15 per share quarterly cash dividend payable on or about May 27th, 2011 to shareholders of record at the close of trading of the Company’s common stock on the New York Stock Exchange on May 20th, 2011.  SB’s payout ratio remains low at 36.5% ($0.15 dividend/$0.41 EPS).  The dividend remains safe like I’ve been saying since I started writing about Safe Bulkers.  SB is yielding 7.4% right now ($0.60 annual dividend/$8.10 market price).

Earning power:  Revenues were up for the third straight quarter.  Net income was down by 15%, but most of that was the absence of the proceeds from a ship sale back in January 2010.  Time charter equivalency rates were almost unchanged from a year ago, so earnings are stable.  I expect Safe Bulkers income to be almost identical to 2010 at about $1.60 per share @ 70.883 million shares.  The stock is currently trading at five times my estimated 2011 earnings.  I have recalculated its average earning power over the past five years + my estimate for this year.  If the above proves true, then SB has an average earning power of $1.90 per share.

Market price: $8.10

Shares: 70.883 M (5 M shares issued recently)

(earnings adjusted for changes in capitalization)

                        EPS                 Net inc.           Adj. EPS

2006                $1.78               $97.224 M       $1.37

2007                $3.84               $209.20 M       $2.95

2008                $2.19               $119.21 M       $1.68

2009                $3.03               $165.41 M       $2.33

2010                $1.73               $109.65 M       $1.55

2011(E)           $0.41x4           $27.3 M x4      $1.54(E)

                        $1.64(E)          $109.20 M (E)

Six year average earnings $1.90 per share.  12 times avg. earnings equals $22.80.  20 times avg. earnings equals $38.00.  This stock is a value because it is trading at 4.26 times its potential six year average earnings.

Balance sheet: Mixed improvements.  Debts decreased slightly, but current ratio and quick ratio worsened.

Book value per share: $3.69

Price to book value: 2.19

Current ratio: 1.00 (this has declined from 1.97 last quarter; above 2.0 is good.  I’m watching this closely)

Quick ratio: 0.90 (this also declined from 1.92 last quarter; above 1.0 is good.  I’m watching this closely)

DISCLOSURE: I don’t own Safe Bulkers yet, but I’m working on some changes to my retirement accounts so I can buy some before investors figure out the value of this high dividend stock.

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SOURCE: Safe Bulkers, Inc.

May 03, 2011 16:05 ET

Safe Bulkers, Inc. Reports First Quarter 2011 Results and Declares Quarterly Dividend

ATHENS, GREECE--(Marketwire - May 3, 2011) - Safe Bulkers, Inc. (the "Company") (NYSE: SB), an international provider of marine drybulk transportation services, announced today its unaudited financial results for the first quarter ended March 31, 2011. The Company's Board of Directors also declared a quarterly dividend of $0.15 per share for the first quarter of 2011.

Summary of First Quarter 2011 Results

--  Net revenue for the first quarter of 2011 increased by 23% to $42.3

    million from $34.3 million during the same period in 2010.

--  Net income for the first quarter of 2011 decreased by 15% to $27.3

    million from $32.1 million, which includes $15.2 million gain on sale

    of a vessel, during the same period in 2010.

--  EBITDA(1)  for the first quarter of 2011 decreased by 7% to $34.4

    million from $37.1 million during the same period in 2010.

--  Earnings per share for the first quarter of 2011 of $0.41, calculated

    on a weighted average number of shares of 65,881,600, compared to $0.58

    in the first quarter 2010, calculated on a weighted average number of

    shares of 55,435,436.

--  The Company's Board of Directors declared a dividend of $0.15 per share

    for the first quarter of 2011.

Link to the full press release: http://mwne.ws/SB1Q2011Results

Wunderlich Securities analysts have no clue on economics and AGNC.

I have one question for the unnamed Wunderlich Securities analyst(s).  Do you think that short term interest rates will rise faster than longer term interest rates in the next one or two years?  Their answer has to be no.  Otherwise, they wouldn’t have said what they said in the article below.

The research firm expects “market trends could support higher debt to equity ratios going forward because collateral is relatively dear in the marketplace.” While not every Index member is a dividend payer, the Index does sport a yield of 10%.

Wunderlich notes wider spreads and adequate liquidity will support returns on equity of over 17% on average this year and could provide support with the potential for multiple expansion.

Interest rates will rise from these artificially low rates manufactured from Federal Reserve digital money creation.  I have posted about this here: http://bit.ly/RatesRise .  Interest rate spreads will tighten when the Federal Reserve’s quantitative easing (QE2) ends in June.  If the Fed stop printing money for a year like they did for most of 2010, then the recession will continue.  Short term interest rates will rise faster than long term rates.  This is the precursor to an inverted yield curve.  The inverted yield curve has preceded almost every recession since the end of World War II.

If the Federal Reserve starts printing money again (QE3) before the onset of another recession, then perhaps the interest rate spreads won’t tighten as quickly.  But the Fed will be sowing the seeds of a bigger calamity later.  American Capital Agency Corp. (AGNC) and the other mortgage REITs are going to have to slash dividends and their stock prices will take huge losses because their asset values will erode.

Ask yourself this question: Did Wunderlich Securities warn their clients that a financial crisis was eminent in 2007?  I can’t find any warnings using the search terms “Wunderlich Securities” + “financial crisis”.  I do know that Peter Schiff, EuroPacific Captial, is an advocate of the Austrian school of economics.  He is on the list of those who warned of the financial crisis: http://marketplayground.com/2010/11/20/twelve-who-forecast-the-financial-crisis/   No one from Wunderlich saw the crisis coming.  Why should you trust them now on mortgage REIT dividend stability?

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Wunderlich Sees Stability In Mortgage REIT Dividends (NLY, AGNC, NRF, CIM, CLNY)

by Jason Smith | May 2nd  |  Filed in: Stock Sector News

The Mortgage Investment Stocks Index is up 0.1% after Wunderlich Securities said metrics reported by the firms in this group that have reported first-quarter earnings speak to the stability of dividends currently in place. Wunderlich notes fewer than half the mortgage REITs under coverage have delivered first-quarter results, but company reports and current market trends indicate stable payouts for investors.

The research firm expects “market trends could support higher debt to equity ratios going forward because collateral is relatively dear in the marketplace.” While not every Index member is a dividend payer, the Index does sport a yield of 10%.

Wunderlich notes wider spreads and adequate liquidity will support returns on equity of over 17% on average this year and could provide support with the potential for multiple expansion.

Shares of Annaly Capital Management (NLY), the largest Index member by market value are fractionally lower today. Annaly has a yield of 13.9%, based on past distributions. With a yield of 19.2%, based on past distributions, American Capital Agency (AGNC) is modestly higher while Northstar Realty Finance (NRF) with a yield of 7.9%, based on past distributions, is soaring 3%. Chimera Investment (CIM) and Colony Financial (CLNY) are both lower by half a percent. Those stocks yield 13.8% and 6.9%, based on past distributions, respectively.

Investors can track dozens of high-yielding indexes at tickerspy.com.

Link to original article: http://www.tickerspy.com/newswire/?p=4402

A summary on Safe Bulkers ahead of earnings. High dividend + value.

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Reuters is reporting that unnamed securities analysts think Safe Bulkers (SB) will earn between $0.32 and $0.43 per share in 1Q2011.  Safe Bulkers will report 1Q2011 earnings after the market closes on May 3rd, 2011.  Safe Bulkers $0.15 quarterly dividend is safe.

Dividend payout ratio - Let’s assume for a moment that the low estimate of $0.32 is accurate.  Their dividend payout ratio would be 47% (dividend per share/earnings per share or $0.15/$0.32).  If the best case proved to be true, then the dividend payout ratio would drop to 35%.  Either way the dividend is safe.

Dividend yield – Safe Bulkers is a high dividend stock yielding 7.41% ($0.60/$8.10).  It has paid $0.15 per quarter for the past nine quarters.

Earning power – The company has a five year average earning power of $1.50 and only trades at 5.4 times the 5 yr. average earnings.  That is a rare value in this stock market.

Balance sheet – recovering and improving

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SOURCE: Safe Bulkers, Inc.

April 28, 2011 09:00 ET

Safe Bulkers, Inc. Sets Date for First Quarter 2011 Results, Dividend Announcement, Conference Call and Webcast

Earnings Release: Tuesday, May 3, 2011, After Market Closes; Conference Call and Webcast: Wednesday, May 4, 2011 at 09:00 A.M. EDT

ATHENS, GREECE--(Marketwire - Apr 28, 2011) - Safe Bulkers, Inc. (the Company) (NYSE: SB), an international provider of marine drybulk transportation services, announced today that it will release its results for the quarter ended March 31, 2011 after the market closes in New York on Tuesday, May 3, 2011. The Company also expects to announce the declaration of a dividend for the first quarter 2011 at that time.

On Wednesday, May 4, 2011 at 9:00 A.M. EDT, the Company's management team will host a conference call to discuss the financial results.

Conference Call details:

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 (866) 819-7111 (US Toll Free Dial In), 0(800) 953-0329 (UK Toll Free Dial In) or +44 (0)1452-542-301 (Standard International Dial In). Please quote "Safe Bulkers" to the operator.

In case of any problem with the above numbers, please dial 1 (866) 223-0615 (US Toll Free Dial In), 0(800) 694-1503 (UK Toll Free Dial In) or +44 (0)1452 586-513 (Standard International Dial In). Please quote "Safe Bulkers" to the operator.

A telephonic replay of the conference call will be available until May 13th by dialling 1 (866) 247-4222 (US Toll Free Dial In), 0(800) 953-1533 (UK Toll Free Dial In) or +44 (0)1452 550-000 (Standard International Dial In). Access Code: 1859591#

Slides and audio webcast:

There will also be a live, and then archived, webcast of the conference call, available through the Company's website (www.safebulkers.com). Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

About Safe Bulkers, Inc.

The Company is an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes for some of the world's largest users of marine drybulk transportation services. The Company's common stock is listed on the NYSE, where it trades under the symbol "SB." The Company's current fleet consists of 16 drybulk vessels, all built post-2003, and the Company has contracted to acquire 11 additional drybulk newbuild vessels to be delivered at various times through 2014.

Jefferies likes AGNC's innovative approach to risk management. Yikes!

Jefferies thinks American Capital Agency Corp. (AGNC) is fairly valued.  Words like “innovative approach to risk management” makes me think of Enron and their “innovative approaches”.  Likewise, words like “sophisticated hedging strategy” sounds to me like a house of cards propped up with counterparty risk.  The financial health of AGNC’s unnamed hedging counterparties cannot be determined.  Would you want to enter into a hedge with Lehman Brothers, AIG, or any other bankster?

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American Capital Agency's (NASDAQ: AGNC) reported 1Q11 results were $0.12 above consensus and book value grew 7% Q/Q. Despite substantial ROE outperformance and the most innovative approach to risk management in the REIT space, Jefferies views the shares as fairly valued. AGNC currently trades to a 1.15 multiple of book value, a justifiable premium to the pure-play Agency REIT average of 1.1x.

During the quarter, AGNC doubled the size of their investment portfolio. Surprising to Jefferies was the company's focus on fixed-rate product, which represented 82% of the total portfolio at quarter-end. Importantly, AGNC does not own TBA mortgages, but rather the company tends to focus on specified pools.

In 1Q11, AGNC increased its exposure not only to plain vanilla interest rate swaps, but also swaptions, synthetic I/O securities, and TBA and Treasury positions in order to increase the duration of their hedge portfolio. AGNC clearly employs the most sophisticated hedging strategy in the mortgage REIT space, Agency or non-Agency.

Jefferies has a $29 PT and Hold rating on AGNC

American Capital Agency closed Tuesday at $28.83

Read more: http://www.benzinga.com/analyst-ratings/analyst-color/11/04/1036131/jefferies-comments-on-american-capital-agency-following-#ixzz1KlL2IMiU

American Capital Agency (AGNC) reports 1Q2011 earnings; dividend still not safe.

American Capital Agency Corp. (AGNC) dividend is not safe.  It has a current dividend payout ratio of 107.6%.  Any payout ratio above 100% is a warning to the dividend investor to expect a cut in the future.  The company earned $1.30 per share for its reoccurring business operations of borrowing short (repurchase agreements) and lending long (agency securities).  But that wasn’t enough to cover the $1.40 quarterly dividend per share.

The company earned another $0.18 per share from the net realized gains on sales of agency securities, derivatives, and trading securities.  You can’t count on reoccurring income from these sales and hedges.

The company reported an improvement to its book value from $24.24 to $25.96.  Remember this – AGNC’s liabilities are real, but its asset values must be questioned.  The housing market is not done being clobbered and the government guarantees on agency securities are empty promises.  I place little faith in the book values of financial companies.  Think Lehman Brothers and their nice book value prior to their implosion.

The company remains highly leveraged 7.4 times.  I don’t like this.  It is a house of cards with an attractive dividend yield.  Net interest rate spreads remain the same as last quarter.  This will not change until interest rates rise.  Interest rates will rise.  It is only a matter of time before this house of financial cards comes crashing down.  Austrian economists predicted the the 2007-2008 crash back in 2005.  They are predicting another crash in the next few years depending on the actions of the Federal Reserve and the commercial bankers.

In summary:

·         Dividend - AGNC has a spectacular 19% dividend yield based on shaky leverage and an inflationary Federal Reserve.  A cut is coming in the next year.

·         Earning power - Its dividend is not supported by its reoccurring operations.  Its three year average earnings per share of $1.18 would only be slightly improved by a continuation of this quarter’s performance for the rest of 2011.  Only new capital issues and the occasional sale of some agency securities at a gain are keeping it afloat.

·         Balance sheet - Its balance sheet is horrible because its like a banks: borrowed short and lent long.  The moment that its 25 unnamed credit suppliers cease to rollover its short term debts the whole house of cards will come crumbling down.

You can view the earnings press release here: http://prn.to/AGNC1Q

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BETHESDA, Md., April 25, 2011 /PRNewswire/ -- American Capital Agency Corp. (“AGNC” or the “Company”) (Nasdaq: AGNC) today reported net income for the first quarter of 2011 of $133.5 million, or $1.48 per share, and book value of $25.96 per share.

FIRST QUARTER 2011 FINANCIAL HIGHLIGHTS

·         $1.48 per share of net income

o    $1.30 per share, excluding $0.18 per share of other investment related income

·         $1.68 per share of taxable income(1)

·         $1.40 per share first quarter dividend

·         $0.42 per share of undistributed taxable income as of March 31, 2011

o    Undistributed taxable income increased $16 million to $55 million

·         $25.96 book value per share as of March 31, 2011

o    Increased $1.72, or 7%, from $24.24 per share as of December 31, 2010

·         22% annualized return on average stockholders’ equity (“ROE”) for the quarter(2)

OTHER FIRST QUARTER HIGHLIGHTS

·         $28 billion investment portfolio value as of March 31, 2011

·         13% constant prepayment rate (“CPR”) for the first quarter of 2011(3)

o    11% CPR for the month of April 2011(4)

·         7.6x leverage as of March 31, 2011(5)

o    7.4x average leverage for the quarter

·         2.58% annualized net interest rate spread for the quarter

o    2.42% net interest spread as of March 31, 2011

·         $1.75 billion of net proceeds raised from equity offered during quarter

o    $1.61 billion raised in two follow-on offerings

o    $141 million raised pursuant to a Controlled Equity Offering(SM) Sales Agreement and via direct share purchase plan share issuances

o    All equity raised was accretive to book value

Here is the press release in its entirety:

BETHESDA, Md., April 25, 2011 /PRNewswire/ -- American Capital Agency Corp. (“AGNC” or the “Company”) (Nasdaq: AGNC) today reported net income for the first quarter of 2011 of $133.5 million, or $1.48 per share, and book value of $25.96 per share.

FIRST QUARTER 2011 FINANCIAL HIGHLIGHTS

·         $1.48 per share of net income

o    $1.30 per share, excluding $0.18 per share of other investment related income

·         $1.68 per share of taxable income(1)

·         $1.40 per share first quarter dividend

·         $0.42 per share of undistributed taxable income as of March 31, 2011

o    Undistributed taxable income increased $16 million to $55 million

·         $25.96 book value per share as of March 31, 2011

o    Increased $1.72, or 7%, from $24.24 per share as of December 31, 2010

·         22% annualized return on average stockholders’ equity (“ROE”) for the quarter(2)

OTHER FIRST QUARTER HIGHLIGHTS

·         $28 billion investment portfolio value as of March 31, 2011

·         13% constant prepayment rate (“CPR”) for the first quarter of 2011(3)

o    11% CPR for the month of April 2011(4)

·         7.6x leverage as of March 31, 2011(5)

o    7.4x average leverage for the quarter

·         2.58% annualized net interest rate spread for the quarter

o    2.42% net interest spread as of March 31, 2011

·         $1.75 billion of net proceeds raised from equity offered during quarter

o    $1.61 billion raised in two follow-on offerings

o    $141 million raised pursuant to a Controlled Equity Offering(SM) Sales Agreement and via direct share purchase plan share issuances

o    All equity raised was accretive to book value

“Our American Capital Agency team delivered another strong quarter with our strategy of actively managing the portfolio,” said John Erickson, AGNC Executive Vice President and Chief Financial Officer. “This strong performance occurred in a quarter marked by significant global economic and political events, which required the periodic reconsideration of investment strategies. Even in this challenging environment, we grew our book value by 7% to $25.96 per share and earned $1.48 per share of net income while taking steps to reduce risk. In addition, we have added to our AGNC investment staff to broaden our expertise, improve our depth and address the Company’s significant growth.”

“We continue to believe the combination of strong asset quality and diversification, coupled with a thoughtful hedging strategy, which includes some optional protection, remains critical to our ability to achieve our dual mandates of generating attractive returns for our shareholders and protecting book value within reasonable bands,” said Gary Kain, President and Chief Investment Officer of AGNC. “During the first quarter of 2011, the Company raised over $1.7 billion in new equity and continued to produce solid returns across a wide range of different measures.  Book value, undistributed taxable earnings and what many analysts call ‘core earnings’ were all higher during the quarter, despite lower leverage resulting from the typical time lags associated with deploying new capital.”

INVESTMENT PORTFOLIO

As of March 31, 2011, the Company’s investment portfolio totaled $28.2 billion of agency securities, at fair value, comprised of $22.9 billion of fixed-rate agency securities, $4.9 billion of adjustable-rate agency securities (“ARMs”) and $0.4 billion of collateralized mortgage obligations (“CMOs”) backed by fixed and adjustable-rate agency securities(6).  As of March 31, 2011, AGNC’s investment portfolio was comprised of 44% </= 15-year fixed-rate securities, 5% 20-year fixed-rate securities, 32% 30-year fixed-rate securities(7), 18% adjustable-rate securities and 1% CMOs backed by fixed and adjustable-rate agency securities.  

ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE SPREAD

During the quarter, the annualized weighted average yield on the Company’s average earning assets was 3.39% and its annualized average cost of funds was 0.81%, which resulted in a net interest rate spread of 2.58%, unchanged from the fourth quarter of 2010.  As of March 31, 2011, the weighted average yield on the Company’s earning assets was 3.47% and its weighted average cost of funds was 1.05%(8).  This resulted in a net interest rate spread of 2.42% as of March 31, 2011, an increase of 14 bps from the weighted average net interest rate spread as of December 31, 2010 of 2.28%(9).  

The weighted average cost basis of the investment portfolio was 104.4% (or 104.0% excluding interest-only strips) as of March 31, 2011. The amortization of premiums (net of any accretion of discounts) on the investment portfolio for the quarter was $48.0 million, or $0.53 per share.  The unamortized net premium as of March 31, 2011 was $1.2 billion.

The Company’s asset yield benefitted from purchases of higher yielding securities late in the fourth quarter of 2010 and during the quarter as the Company invested capital from its recent capital raises subsequent to recent increases in interest rates and from a decline in the projected CPR for the remaining life of the Company’s investments. Premiums and discounts associated with purchases of agency securities are amortized or accreted into interest income over the estimated life of such securities, using the effective yield method. Given the relatively high cost basis of the Company’s mortgage assets, slower prepayment projections can have a meaningful positive impact on asset yields.  The projected CPR for the remaining life of the Company’s investments as of March 31, 2011 was 10%; a decrease from 12% as of December 31, 2010.  The decrease in the projected CPR is largely due to purchases of lower coupon securities during the quarter coupled with increases in both spot and forward interest rates. The actual CPR for the Company’s portfolio held in the first quarter of 2011 was 13%, a decrease from 18% during the fourth quarter of 2010.  The most recent CPR for the Company’s portfolio for the month of April 2011 was 11%.

The Company’s average cost of funds declined 9 basis points from 0.90% for the fourth quarter of 2010 to 0.81% for the first quarter of 2011, due largely to timing differences between asset settlements and the initiation of new interest rate swap contracts. These differences led to lower effective swap costs during the quarter than is expected to occur in future periods. The cost of funds as of March 31, 2011 includes both current and forward starting swaps balances, net of expirations, within three months of quarter end.

LEVERAGE AND HEDGING ACTIVITIES

As of March 31, 2011, the Company’s $28.2 billion investment portfolio was financed with $22.0 billion of repurchase agreements, $0.1 billion of other debt(10) and $3.3 billion of equity capital, resulting in a leverage ratio of 6.6x.  When adjusted for the net payable for agency securities not yet settled, the leverage ratio was 7.6x as of March 31, 2011.  The average leverage for the quarter was 7.4x as the Company deployed capital from its recent equity raises.

Of the $22.0 billion borrowed under repurchase agreements as of March 31, 2011, $5.7 billion had original maturities of 30 days or less, $8.7 billion had original maturities greater than 30 days and less than or equal to 60 days, $5.8 billion had original maturities greater than 60 days and less than or equal to 90 days and the remaining $1.8 billion had original maturities of 91 days or more. As of March 31, 2011, the Company had repurchase agreements with 25 financial institutions.    

The Company’s interest rate swap positions as of March 31, 2011 totaled $15.1 billion in notional amount at an average fixed pay rate of 1.79%, a weighted average receive rate of 0.25% and a weighted average maturity of 3.6 years.  During the quarter, the Company increased its swap position, including forward starting swaps ranging up to twelve months, by $8.5 billion in conjunction with an increase in the portfolio size.  The new swap agreements entered into during the quarter have an average term of approximately 4.2 years and a weighted average fixed pay rate of 1.93%. The Company intends the use of swaps with longer maturities to protect its book value and longer term earnings potential.

The Company also utilizes swaptions to mitigate the Company’s exposure to larger changes in interest rates.  During the quarter, the Company added $1.6 billion of payer swaptions at a cost of $17.2 million and $0.3 billion of receiver swaptions at a cost of $0.4 million. During the quarter, $0.3 billion of payer swaptions from a previous quarter expired or were sold.  As of March 31, 2011, the Company had $2.1 billion in payer swaptions outstanding at a market value of $21.3 million.

As of March 31, 2011, 68% of the Company’s repurchase agreement balance and other debt were hedged through interest rate swap agreements. If net unsettled purchases and sales of securities are incorporated, this percentage declines to 60%.  These percentages do not reflect the swaps underlying the payer swaptions noted above, which have an average maturity of 6.1 years.

OTHER INCOME, NET

During the quarter, the Company produced $15.8 million in other income, net, or $0.18 per share.  Other income is comprised of $4.2 million of net realized gains on sales of agency securities, $31.0 million of net realized gains on derivative and trading securities and $19.4 million of net unrealized losses, including reversals of prior period unrealized gains and losses realized during the current quarter, on derivative and trading securities that are marked-to-market in current income.  

The net gains and losses (realized and unrealized) on derivative and trading securities generally represent instruments that are used to supplement the Company’s interest rate swaps (such as swaptions and short or long positions in “to-be-announced” mortgage securities (TBA’s), Markit IOS total return swaps(11) and  treasury securities). Under accounting rules, these positions are not in hedge relationships and consequently are accounted for through current income instead of shareholders’ equity.  The Company uses these supplemental hedges to reduce its exposure to interest rates.

TAXABLE INCOME

Taxable income for the first quarter of 2011 was $1.68 per share, or $0.20 higher than GAAP net income per share for the quarter. The primary difference between tax and GAAP net income is unrealized gains and losses associated with derivatives marked-to-market in current income for GAAP purposes but excluded from taxable income until realized or settled. Taxable income for the first quarter of 2011 benefited from the settlement of gains derived from short TBA positions and payer swaptions entered into during the fourth quarter of 2010. As of March 31, 2011, net unrealized gains that have been recognized for GAAP, but excluded from taxable income, totaled $10 million. Assuming no change in market prices as of March 31, 2011, the Company anticipates recognizing most of these net gains as taxable income during the second quarter of 2011.

NET ASSET VALUE

As of March 31, 2011, the Company’s net asset value per share was $25.96, or $1.72 higher than the December 31, 2010 net asset value per share of $24.24.  

FIRST QUARTER 2011 DIVIDEND DECLARATION

On March 7, 2011, the Board of Directors of the Company declared a first quarter 2011 dividend of $1.40 per share payable on April 27, 2011, to stockholders of record as of March 23, 2011. Since its May 2008 initial public offering, the Company has paid or declared a total of $499.2 million in dividends, or $14.66 per share.  After adjusting for the first quarter 2011 accrued dividend, the Company had approximately $55 million of undistributed taxable income as of March 31, 2011, an increase of $16 million from December 31, 2010. Undistributed taxable income per share as of March 31, 2011 was $0.42 per share.  

(1) Based on the weighted average shares outstanding for the quarter.  Please refer to the section on the use of Non-GAAP financial

Chart: Safe Bulkers (SB) basic balance sheet 2006-2010.

I’ve been experimenting with visualizing balance sheets over time.  Here is a chart of Safe Bulkers (SB) basic balance sheet from 2006 – 2010:

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It is nice to see the rebound in stockholder’s equity since 2008.

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Two views of Terra Nitrogen (TNH) VALUE or INVESTMENT?

Terra Nitrogen (TNH)

Market price: $110.75

Shares: 18.5 million

Dividend yield: 4.9%

Quarterly dividend: $1.36

Book value: $11.35

            EPS                   Net inc.             Adj. EPS

2006     $2.45                $45.73 M           $2.47

2007     $10.90              $205.782 M       $11.12

2008     $14.90              $422.385 M       $22.83

2009     $5.40                $100 M              $5.41

2010     $8.01                $148.2 M           $8.01

At first glance Terra Nitrogen appears to be a VALUE investment trading 11.1 times its 5 yr. average earnings.

Five year average earnings $9.97

12 times five year average earnings = $119.64

20 times five year average earnings = $199.40

If you believe that the last 5 years are more representative of Terra Nitrogen’s future performance, then TNH is a value at $110.75 per share.  However, the numbers change if you take a 10 year view of Terra Nitrogen.

Ten year average net income: $108.3 million

Ten year average earnings per share: $5.85

12 times ten year average earnings = $70.20

20 times ten year average earnings = $117.00

Terra Nitrogen is trading at 18.93 times its 10 yr. average earnings.  This is in the INVESTMENT basis range, and at nearly 20 times 10 yr. average earnings it is almost SPECULATIVE.

I like to take the longer term view when possible to be conservative.  I would buy TNH below $70.20.  It was priced below $70 in June 2010.  The stock has been on a large run since June 2010.  By waiting for a correction you can get a better dividend yield, the price to book value would be improved, and the price relative to earnings would be in the VALUE range.

Disclosure: I don’t own Terra Nitrogen (TNH).

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AGNC's liabilities are real and their book value must be questioned.

I wonder what Wunderlich Securities analysts are smoking?  These people are obviously devotees to Keynesian economics.  They believe that printing money to buy US Treasuries or agency MBS will only make the economic crisis worse later and destroy AGNC’s profitability.  The Federal Reserve is attempting to paper over the problem they created.  AGNC’s liabilities are real, but their asset values must be questioned.  The book value of AGNC is bogus.  I wrote about this recently:

http://bit.ly/EconFools

Anyone who assumes that AGNC’s book value as stated in their financial reports is trustworthy will be sorely mistaken when the next financial crisis hits.  The loss of book value can be caused by several factors.  They will happen.  It is just a matter of time.  The laws of economics assure it.

The structural problem in the world financial system remain unfixed.  Keynesian central bankers are inflating wildly forestall the day of reckoning.  The next financial crisis will destroy MBS REITs profitability and book values.  Enjoy the high dividend yields while they last.

So be warned that there is trouble on the horizon for the MBS high dividend stocks and plan your exit accordingly.  Annaly Capital Management (NLY) has decreased its dividend during the last two quarters.  I expect AGNC to do the same.

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Wunderlich Securities has a research report on housing finance and mortgage REITs. In the note, Wunderlich mentions American Capital Agency Corp. (NASDAQ: AGNC).”

In a note to clients, Wunderlich writes, "Market concerns over the pending termination of QE2 pressured the mortgage REITs. Though we believe the homeowner lacks the financial flexibility to carry the economy out of the ongoing sluggish economy, we do expect that interest rates could tend to rise through May and the end of this round of easing. At the same time, we believe that easing will continue, though perhaps in different forms. For example, a policy to keep mortgage rates low could be executed through purchases of agency MBS, which could sustain liquidity in the housing finance secondary market. Higher benchmark rates could put pressure on book value and tighten spreads, but we believe that relatively high dividends in our coverage universe will be sustainable. With dividends providing price support, we expect the group to stage a slow recovery to an average 15% premium to trailing book value."”

Shares of AGNC lost 17 cents on Friday to close at $28.53, a loss of 0.6%.

Read more: http://www.benzinga.com/analyst-ratings/analyst-color/11/04/1010248/wunderlich-securities-discusses-housing-finance-and-mort#ixzz1JtQ8Nw1C

Foolish recommendations for AGNC from economic fools

Here is another glowing article from The Motley Fool CAPS community about AGNC:
http://www.fool.com/investing/general/2011/04/15/4-star-stocks-poised-to-pop-...

These people do not understand economics. The author discounts the risk that interest rates will rise enough in the next few months which would hurt AGNC's profitability. The Federal Reserve is scheduled to end it's quantitative easing 2 (QE2) buying of US treasuries this summer. Interest rates are already rising despite the Fed's efforts. They will go even higher when the Fed ceases to inflate. The Fed has been buying around 80% of the US bonds auctioned since QE2 started. The US government will continue to spend more than $1.6 trillion dollars than they extort in taxes. This is bad for AGNC because risk of US government default increases and the guarantees of agency securities will be an easy target of congress to cut.

QE 2 is Fed chairman Bernanke's panicked reaction to the threat of a double dip recession. It is inflating like crazy right now. Once QE 2 is over If the Fed ceases to inflate for more than a year like it did in 2010, then a new financial crisis will emerge bigger than the crisis of 2008. Banks will possibly cut off AGNC from cheap short term borrowings (repurchase agreements) or cease lending to the altogether. This would destroy their profitability very quickly. Also their agency securities would lose value which would compound AGNC's problems. Interest rates go higher than they are now in that situation also.

The party is almost over for all the high dividend mortgage REITs. Their fates are in the hands of the commercial bankers, the Federal Reserve, and the US Congress. I wouldn't want my high dividend stock portfolio exposed to those assclowns.

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TIP OF THE WEEK - How to see 10 years of financial info in just two clicks

How to see 10 years of financial info in just two clicks

Jason Brizic

Apr. 15, 2011

Serious investors want to quickly absorb a company’s earning power and balance sheet strength over a long period of time to make better investment decisions.  A long period of time usually contains a Federal Reserve induced boom and bust.  Investors want to know how a potential stock purchase performed during the boom and bust times so they can estimate the potential risk/reward ratio.  We have experienced a boom (2003-2007) and a bust (2008-2009) in the past 10 years.

Big Promise – If you only look at the past year or three of financials, then you might be ignoring some valuable investment information.  You want to be able to quickly see how a company’s average earning power, book value per share, and other key ratios have changed over time to see how the company performed in good times and bad.

Specific claims – Morningstar.com has a 10 years of summary financials available for free on its “Key Ratios” tab.  You can get to it in two clicks.  Type your stock ticker in the Quote box at the top of the homepage and then click on “Key Ratios”.  This is very helpful during the stock screening process.  I use three rows of numbers from this view when I first examine a company: Revenue, Net Income, and Book Value per Share.

Follow with the proof – Here is the “Key Ratios” view of the 6% high dividend stock First Energy (FE) that I’m examining.

http://financials.morningstar.com/ratios/r.html?t=FE&region=USA&culture=en-US

I immediately click on the Export action button to get the data in a spreadsheet.  I use the spreadsheet to find the average net income over the 10 year period.  First Energy averaged $913.2 million in earnings per year (2001-2010).  I take that number divided by the number of current shares (418.22 million).  That gives me average earnings per share over 10 years ($2.18).  Then I multiple the average earnings by 12 and 20 to see if the current market price is below 12x average earnings (VALUE), between 12x-20x average earnings (INVESTMENT), or above 20x average earnings (SPECULATIVE).

$2.18 x 12 = $26.16

Market price = $38.43 (possible INVESTMENT basis)

$2.18 x 20 = $43.60

I can also see that First Energy’s book value per share is $28.02.  I can also see in a glance that revenues have fluctuated between a low of $7.999 billion in 2001 and $13.627 billion in 2008).  This sets me up for the next round of detailed analysis.  I will put First Energy on my watch list at around $28 per share while I perform that analysis.

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http://www.myhighdividendstocks.com/category/tip-of-the-week