AGNC will probably cut its dividend

American Capital Agency Corp. (AGNC) will have to cut its dividend at some point in a few quarters if its operating results are similar to the 3Q 2010 it just reported.
 
Recap: AGNC reported earnings of $1.69 per share during third quarter 2010, compared to $1.82 in the year-earlier quarter. Excluding non-recurring items, recurring net income for the reported quarter was $1.11 per share.
 
Its current dividend is $1.40 per share.  That equates to a 126% dividend payout ratio (1.40 divided by 1.11).  Dividend payout ratios above 100% can't go on forever.  The company only has $115.3 million in cash and cash equivalents to pay for the gap between its dividend and its recurrent earnings.  It could sell some of its agency security holdings like it did this quarter, but you should count on this tactic to earn money everytime.
 
The whole banking system is a house of fractional-reserve cards.  Stay away from it.
 
Be seeing you!
Advertisements
Published in: on November 7, 2010 at 8:46 am  Leave a Comment  

The URI to TrackBack this entry is: https://myhighdividendstocks.wordpress.com/2010/11/07/agnc-will-probably-cut-its-dividend/trackback/

RSS feed for comments on this post.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: