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.
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.
Warning - AGNC dividend payout ratio might exceed 115% for 4Q2010.
AGNC’s last quarterly dividend was $1.40 per share. They announced in December that they would pay a $1.40 dividend for 4Q2010. They have paid $1.40 per share since 3Q2009. However, AGNC disclosed on January 12th, 2011 that it expects to earn at least $1.20 in 4Q2010. That isn’t enough to cover the dividend. I wrote about this on December 17th, 2010.
Their dividend payout ratio will rise above 100%. That is a warning to high dividend stock investors that a cut to the dividend in coming in future quarters unless something changes that course. A $1.40 divided by $1.20 equals a dividend payout ratio of 116%. Yikes! If the unnamed analysts are correct, then the payout ratio will be 108.5% for 4Q2010. Factor this into your investment plans if you own AGNC.
Disclosure: I don’t own AGNC shares.
American Capital Agency Corp. Issues Q4 2010 EPS Guidance In Line With Analysts' Estimates
Wednesday, 12 Jan 2011 04:08pm EST
American Capital Agency Corp. announced that for the fourth quarter of 2010, it expects earnings per share (EPS) to exceed $1.20, including an anticipated benefit from slower projected prepayment speeds. According to Reuters Estimates, analysts are expecting the Company to report EPS of $1.29 for the fourth quarter of 2010.
http://www.reuters.com/finance/stocks/keyDevelopments?rpc=66&symbol=AGNC.O×tamp=20110113225400
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REITs and other stocks don’t qualify for lower dividend tax treatment
Jason Brizic
Jan. 7, 2011
On December 17th, 2010 president Obama signed the bill extending the Bush tax cuts for another two years. Investors who receive qualified dividends will continue to enjoy the same 15% maximum tax rate as capital gains.
REITs, master limited partnerships (MLPs), and some foreign stocks don’t qualify and are taxed as ordinary income. Foreign stocks that are American Depository Receipts (ADRs) are qualified. Annaly Capital (NYSE: NLY) and American Capital Agency Corp(Nasdaq: AGNC) are among the many high-yielding REITs whose dividends don't qualify for the 15% maximum rate.
REITs, MLPs, and foreign dividends are taxed at the rate of your ordinary income. For most investors that means 25%, 28%, 33%, or 35% dividend tax depending on your income.
Tax bracket | AGNC after tax dividend yield @ 19.5% market yield | NLY after tax dividend yield @ 14.6% market yield |
10% | 17.55% | 13.14% |
15% | 16.56% | 12.41% |
25% | 14.63% | 10.95% |
28% | 14.04% | 10.51% |
33% | 13.07% | 9.78% |
35% | 12.68% | 9.49% |
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BETHESDA, Md., Dec. 17, 2010 /PRNewswire-FirstCall/ -- American Capital Agency Corp. (Nasdaq: AGNC) ("AGNC" or the "Company") announced today that its Board of Directors has declared a cash dividend of $1.40 per share for the fourth quarter 2010. The dividend is payable on January 27, 2011 to common shareholders of record as of December 31, 2010, with an ex-dividend date of December 29, 2010.
Here is the link to the press release: http://www.prnewswire.com/news-releases/agnc-declares-140-fourth-quarter-dividend-112091904.html
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AMERICAN CAPITAL AGENCY CORP.
NEW YORK |
NEW YORK (Reuters) - Shares of American Capital Agency Corp (AGNC.O) fell 6.9 percent to $25.65 in premarket trading on Friday, a day after the company commenced a public offering of common stock.
(Reporting by Ryan Vlastelica; Editing by Theodore d'Afflisio)
Article link: http://www.reuters.com/article/idUKTRE64D34P20100514?type=companyNews
Here is the press release courtesy of www.PRnewswire.com:
BETHESDA, Md., Dec. 9, 2010 /PRNewswire-FirstCall/ -- American Capital Agency Corp. (Nasdaq: AGNC) (“AGNC” or the “Company”) announced today that it priced a public offering of 8,000,000 shares of common stock for total net proceeds of approximately $219 million. Citi and Deutsche Bank Securities acted as underwriters for the offering. In connection with the offering, the Company has granted the underwriters an option for 30 days to purchase up to an additional 1,200,000 shares of common stock to cover overallotments, if any. The offering is subject to customary closing conditions and is expected to close on December 14, 2010.
AGNC expects to use the net proceeds from this offering to acquire additional agency securities as market conditions warrant and for general corporate purposes.
To read the whole press release go here: http://www.prnewswire.com/news-releases/agnc-announces-pricing-of-public-offering-of-common-stock-111598429.html
Let’s do some simple back of the envelope math. The press release mentions that AGNC expects $219 million in new capital will be raised by the new offering. $219 million divided by 8 million shares = $27.38/share. If the full 9.2 million shares are purchased then the per share price drops to $23.48/share.
No wonder AGNC dropped from $29.50/share at the close on December 8th, to $25.65 in pre-market trading. At 9:42 am MST it has climbed to $28.52.
So how many agency securities can AGNC buy with $216 million dollars in new capital. AGNC maintained an average leverage level of 8.5x in the third quarter of 2010 according to their latest 10-K quarterly report. If we apply that leverage level to the amount of new capital to be leveraged we get:
$216 million times 8.5 equals $1.836 billion dollars in new agency securities.
Their portfolio size was $9.7 billion at the end of the third quarter 2010. Add the $1.836 billion in new agency securities and I expect their portfolio to grow to $11.536 billion by the end of the fourth quarter 2010. I also expect AGNC interest rate spread to tighten. If I use the tighter interest rate spread of 2.12% from 2009, then I get a total revenue of $244.6 million for four quarters. Divide that number by four to represent expected net income in the 4th quarter 2010 and you get: $61,140,000 per quarter net income.
According to Google Finance there are 52.19 million AGNC shares outstanding. If AGNC keep its dividend of $1.40/share, then it will need to pay a $73,066,000 dividend payment in the 4th quarter of 2010. That is unlikely to happen because net income in the 3rd quarter was $60.0 million with a $9.7 billion portfolio and an interest rate spread of 2.21%. The question remains whether AGNC can grow the portfolio and the interest rate spread sufficiently to generate enough income to keep paying that $1.40/share dividend. I don’t think they can do it. Time will tell.
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THIRD QUARTER 2010 FINANCIAL HIGHLIGHTS
BETHESDA, Md.
THIRD QUARTER 2010 FINANCIAL HIGHLIGHTS
You should carefully examine the consolidated earnings statements of companies that own subsidiaries and significant interest in other companies. Some companies in the past have under reported the losses of their subsidiaries and manipulated the surplus account in nefarious ways in order to make their earnings per share look less volatile. You should adjust the earnings of the company you are analyzing accordingly to determine their true earning power.
American Capital Agency Corp. (AGNC) is a subsidiary of American Capital Ltd (ACAS). I’m not analyzing the parent company, so I’m not going to go through the pains of investigating American Capital.
American Capital Agency Corp. (AGNC) owns a single wholly-owned subsidiary called American Capital Agency TRS, LLC. I learned this from Note 1 in its most recent 10-K filing.
Here is the hierarchy:
American Capital LTD owns American Capital LLC which owns American Capital Agency Corp.
Note 1. Unaudited Interim Consolidated Financial Statements
The interim consolidated financial statements of American Capital Agency Corp. (together with its consolidated subsidiary, is referred throughout this report as the “Company”, “we”, “us” and “our”) are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10−Q and Article 10 of Regulation S−X. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Our unaudited consolidated financial statements include the accounts of our wholly−owned subsidiary, American Capital Agency TRS, LLC. Significant intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair presentation of financial statements for the interim period have been included. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. There has been no activity in American Capital Agency TRS, LLC during the six months ended June 30, 2010 and 2009.
AGNC has consolidated the accounts of its subsidiary into its reported. I don’t see any manipulation or hiding of losses by AGNC. No adjustments to the earnings are necessary for the profits/losses of subsidiaries.
Here is the summary paragraph from the end of the section on losses of subsidiaries in the wonderful book Securities Analysis.
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To avoid leaving this point in confusion, we shall summarize our treatment by suggesting:
1. In the first instance, subsidiary losses are to be deducted in every analysis [of the income account]
2. If the amount involved is significant, then the analyst should investigate whether or not the losses may be subject to early termination.
3. If the result of this examination is favorable, the analyst may consider all or part of the subsidiary’s loss as the equivalent of a nonrecurring item.
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BETHESDA, Md., Sept 27, 2010 /PRNewswire via COMTEX/ -- American Capital Agency Corp.(AGNC 26.70, -1.29, -4.61%) ("AGNC" or the "Company") announced today that it intends to offer, subject to market and other conditions, 10,000,000 shares of its common stock in an underwritten public offering. In connection with the offering, the Company intends to grant the underwriters an option for 30 days to purchase up to an additional 1,500,000 shares of common stock to cover overallotments, if any.
AGNC expects to use the net proceeds from this offering to acquire additional agency securities as market conditions warrant and for general corporate purposes.
BofA Merrill Lynch, Citi, Deutsche Bank Securities and UBS Investment Bank are joint book-running managers for the offering.
The offering will be made pursuant to AGNC's existing shelf registration statement, previously filed with and declared effective by the Securities and Exchange Commission. The offering of these securities will be made only by means of a prospectus and a related prospectus supplement. When available, copies of the prospectus and prospectus supplement may be obtained from BofA Merrill Lynch, Attn: Prospectus Department, 4 World Financial Center, New York, New York 10080; Citi, Brooklyn Army Terminal, 140 58th Street, 8th Floor, Brooklyn, New York 11220; telephone: (800) 831-9146; Deutsche Bank Securities, Prospectus Department, Harborside Financial Center, 100 Plaza One, Jersey City, New Jersey 07311-3988; telephone: (800) 503-4611 or UBS Investment Bank, Attn: Prospectus Department, 299 Park Avenue, New York, New York 10171; telephone: (888) 827-7275.
This press release does not constitute an offer to sell or the solicitation of an offer to buy shares of common stock, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
ABOUT AGNC
AGNC is a REIT that invests in agency pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a U.S. Government agency or a U.S. Government-sponsored entity. The Company is externally managed and advised by American Capital Agency Management, LLC, an affiliate of American Capital, Ltd. ("American Capital"). For further information, please refer to www.AGNC.com.
Here is the link to the rest of the legalese: http://www.marketwatch.com/story/agnc-commences-public-offering-of-common-stock-2010-09-27?reflink=MW_news_stmp