Real estate investment trust AGNC Investment Corp. reported a fourth quarter loss in comprehensive net income per share of $1.19 in 2016 but beat Wall Street expectations.
The company also announced it had entered into separate sales agreements with Cantor Fitzgerald & Co. and Wells Fargo Securities LLC and may offer up to $750 million of common stock.
In an 8-k filing with the Securities and Exchange Commission AGNC reported a minus 5.2 percent total economic return for the quarter, and a 7.6 percent decrease in the net book value per share since Sept. 30, 2016.
Essentially all of the company’s $57.7 billion portfolio consists of agency mortgage backed security debts. Agency debts are backed by the Federal government through Fannie Mae and Freddie Mac.
Gary Kain, the company’s president and chief executive officer, attributed the decline to the U.S. presidential election and the resulting volatility in the financial markets.
“The unanticipated outcome of the U.S. presidential election triggered a major repricing in nearly every financial market,” Kain said. “U.S equity prices increased to new highs, and U.S. Treasury prices fell significantly during the quarter.”
AGNC is a mortgage REIT and invests money it has raised by purchasing mortgages on the secondary mortgage market. The company’s profit is roughly based on the spread between short and long term bond interest rates.
Following the U.S. presidential election, the yield for 10-year treasury notes increased by over 100 basis points. According to the company, this increase in yields, along with the Federal Reserve’s decision to raise interest rates, caused the declining net book value per share.
However the 64-cent fourth quarter net spread per common share beat the Zach’s Investment Research consensus estimate of 60 cents. This also excludes 26 cents per share of estimated “catch-up” amortization benefit from changes to project constant prepayment rate estimates.
The company declared a 54-cent dividend for the quarter, bringing total distributions to stockholders since the company’s IPO in 2008 to $35. REITs are required by law to pay out 90 percent of income in dividends, and they typically yield dividends of around 10 percent.
