Downgrade of US Credit Rating a Danger to REIT Dividends
July 28 2011 - 7:16AM
Marketwired
With S&P warning there is 50-50 chance of a downgrade to the
US' Credit Rating, investors are looking for safe havens.
Traditionally, high yielding REITs garner attention due to their
reliable income. However recent reports warn that a downgrade to US
government debt could have a sizeable impact on REIT earnings --
and their dividends. The Bedford Report examines the outlook for
diversified REITs and provides equity research on American Capital
Agency Corporation (NASDAQ: AGNC) and Invesco Mortgage Capital,
Inc. (NYSE: IVR). Access to the full company reports can be found
at:
www.bedfordreport.com/AGNC
www.bedfordreport.com/IVR
Several mortgage REITs are trading close to 52 week lows at the
moment as analysts consider these companies at risk from the
potential downgrade of US government debt. Agency Mortgage REITs
such as American Capital Agency have portfolios made up principally
of mortgages insured by the federal agencies Fannie Mae, Freddie
Mac and Ginnie Mae. A downgrade in US debt would make paper from
these federal agencies suffer a downgrade along with most other
government-related bonds.
According to Jon D Markman, editor of Strategic Advantage, if
the paper is downgraded their prices will drop and yields will
rise. "When the price of collateral drops, a holder has to put up
more money or other paper to replace that value -- much like a
margin call," argues Markman. Markman adds that these kinds of
developments can lead a REIT to cut back on its dividend.
The Bedford Report releases stock research on REITs so investors
can stay ahead of the crowd and make the best investment decisions
to maximize their returns. Take a few minutes to register with us
free at www.bedfordreport.com and get exclusive access to our
numerous analyst reports and industry newsletters.
Earlier this week American Capital Agency reported net income
for the second quarter of 2011 of $177.8 million, or $1.36 per
share. Taxable income for the second quarter was $1.56 per share,
or $0.20 higher than GAAP net income per share for the quarter.
Presently the company pays an annual dividend of $5.60 per share
for a massive yield of around 19 percent.
Invesco Mortgage Capital currently pays an annual dividend of
$3.88 a share for a yield of around 18.5 percent. Yesterday the
company posted 39 percent year-on-year increase in quarterly net
income, driven by an increase in average earning assets as the
Company invested the funds from the follow-on common stock
offerings completed in March and June 2011.
The Bedford Report provides Market Research focused on equities
that offer growth opportunities, value, and strong potential
return. We strive to provide the most up-to-date market activities.
We constantly create research reports and newsletters for our
members. The Bedford Report has not been compensated by any of the
above mentioned publicly traded companies. The Bedford Report is
compensated by other third party organizations for advertising
services. We act as an independent research portal and are aware
that all investment entails inherent risks. Please view the full
disclaimer at http://www.bedfordreport.com/disclaimer
Add to Digg Bookmark with del.icio.us Add to Newsvine
Contact: The Bedford Report Email Contact
AGNC Investment (NASDAQ:AGNC)
Historical Stock Chart
From Jun 2024 to Jul 2024
AGNC Investment (NASDAQ:AGNC)
Historical Stock Chart
From Jul 2023 to Jul 2024