American Capital Agency Corp. (AGNC), a leading real estate investment trust (REIT), has recently declared a third quarter cash dividend of $1.40 per share. American Capital Agency is one of only a few companies to have increased its dividend during the economic downturn. The current payout equates to a total of $11.86 per share in dividends since its initial public offering in May 2008.
American Capital Agency invests only in fixed-rate agency securities where payments are guaranteed by the U.S. government or government-owned entities such as Fannie Mae (FNM), Freddie Mac (FRE) and Ginnie Mae. Specifically, American Capital Agency invests in Freddie Mac Gold certificates, and certificates of Fannie Mae and Ginnie Mae. We like the company's focused investment approach, which is not distracted by originations, servicing, or credit risk from investments in mortgages that do not have the backing of the U.S. government.
Agency residential lenders such as American Capital Agency are the only residential mortgage REITs left with a viable business model, more specifically, with access to capital to fund growth during recession and still having liquid assets. With the government takeover of Fannie Mae and Freddie Mac, American Capital Agency's securities now have an explicit government guarantee, which makes agency REITs a much more attractive prospect for investors. Additionally, the company's portfolio of government-backed assets is relatively liquid and credit risk is limited.
Shares of American Capital Agency began trading on NASDAQ on May 15, 2008. The company sold 10 million shares at an initial offering price of $20.00 each. The company's external manager who owns 33% of the shares privately placed about 5 million shares at the offer price. American Capital Agency is externally managed by American Capital Agency Management, which is a wholly owned subsidiary of American Capital, LTD (ACAS), a $15 billion publicly traded asset management company.
We maintain our Neutral recommendation on American Capital Agency, which currently has a Zacks #3 Rank that translates into a short-term Hold rating and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 13 months.
AMER CAP LTD (ACAS): Free Stock Analysis Report
AMER CAP AGENCY (AGNC): Free Stock Analysis Report
Zacks Investment Research
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