Friday, September 19, 2008

American Capital Agency: Really Making Money

Jaded Consumer predicted of American Capital Agency (AGNC), following the 31¢ dividend it paid on the 27-day stub second quarter in which it initiated operations, that its full-quarter dividend looked set to exceed 90¢. Today, AGNC announced a quarterly dividend of $1.00 per share for its first full quarter of operations. At AGNC's IPO price of $20, this would yield an annual dividend return of 20% -- but AGNC hasn't closed at 20 since Monday, September 8. AGNC is likely to continue to exceed a 20% return even if it trades marginally above NAV.

AGNC's performance continues to be understated at Yahoo because it hasn't got twelve trailing months of performance, so AGNC's partial-year results are given as full-year results. The sale on AGNC should continue while AGNC continues to fly under the radar of investors using screening tools that aren't smart enough to notice AGNC's annualized results.

Whether AGNC remains mispriced after that is another question entirely.

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