|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
American Capital Agency Will Outperform Peers This Year
Posted by: Vatalyst.com (IP Logged)
Date: April 22, 2012 02:57PM
With so many REITs out there at the moment, how does American Capital Agency (AGNC) stack up? As of right now, it would seem that American is on the way up for an extended stay at the top of the REIT options (judging by the current price of American stock) but is this a façade that that investors should avoid falling into? As of right now, American is actually a great investment to make if you are looking for a decent yield and relatively high stock prices that will ensure every investor gets a comparable return, but how does it compare to other REITs?
One big name REIT that many investors consider when trying to achieve a decent yield every ex-dividend date is Annaly Capital Management (NLY), but is it right for you? As of right now, Annaly’s stock prices are slight on the rise, but in the past year overall, the prices have decrease while the yield percentages have remained steady. I personally would recommend avoiding Annaly right now. It is quite obvious what it is doing, as the market is hurt and prices drop, as do the yields percentages, normally. Annaly is maintaining a steady yield to try and garner support from investors in their seemingly failing stock, and this is of course bad for both the long term and short term investor. I predict that, soon enough, we will begin to see Annaly’s yields falter until it is near next to nothing. Of course, while the entire market is taking a hit right now, it is no reason to invest in a failing company and as of right now, Annaly definitely falls into this category. So, avoid Annaly as this time, although some other speculators are emphasizing the opposite, I definitely feel the opposite about this company and can see it going bad quite soon.
Another option that investors have when considering REITs is ARMOUR Residential REIT (ARR). As of right now, we can see the yield percentage seems to be on a seemingly steady decline in yield percentages, even as the price of the stock continues to grow over the last month. This is exactly the exact opposite situation as we see with Annaly, and for good reason. The simple fact is that when a company, especially an REIT, maintains a yield rate that simply does not correspond to the financials associated with said company, the situation just cannot hold up. In this case, ARMOUR’s decreasing yield rate actually implies that the company is beginning to level out its insane yield percentage. While 17.5% is still very high for any REIT, it is substantially lower than the 20% that ARMOUR began with in January. Since the company seems to be lowering its yield percentages, it would appear that financials are not in a good state. This is not always the case and is surely not the case in ARMOUR. It is, contrary to popular belief, increasing the interest from investors in its company by establishing a standard yield rate that is sustainable, at least for the short term.
So, for now, I would suggest getting the money into ARMOUR while the going is good to ensure that one can take advantage of the high yield rates. While these rates will not last forever, it will be around as long as the company sticks to its higher leverage based spending to show investors that ARMOUR is interested in growth. Definitely keep an eye ARMOUR, and I would suggest getting into some ARMOUR stock right now to ensure that one can obtain the high yields that are available right now.
Invesco Mortgage Capital (IVR) is an REIT that is under the watchful of many investors, but is it one that I would recommend being purchased? Unlike other, less dependable REITs, Invesco is actually decreasing its yield percentage as the stock price goes down. A leveling out of unattainably high yields perhaps? While there are many reasons for the decrease of stock prices and yields, they are direct indicators of each other. Expect to see Invesco continue to fall because the company, simiarily to the route that Annaly is taking, decided to keep the yield percentages high. Of course, this is just not possible, and this idea of stocks yields decreasing as the profitability decreasing is simply common sense. If you look at Invesco’s numbers, you will see that the company has been losing money over the course of the last few years, and many of it was in high yield percentages. Avoid Invesco at the moment to ensure that you do not lose money on an REIT that is sinking relatively quickly, and do not expect it to rise in the short term. Invest in a much more profitable stock, such as American.
So, when comparing American to all of the previously mentioned stocks, how is it? Simply put, American is an REIT that will satisfy many for a while to come. Expect the yield percentage to drop a miniscule amount over the next few months as the stock price levels out, but also expect a relatively high yield that can sustain itself. The most important thing to do in this situation is keep an eye out for American’s financials. As long as all of the numbers add up, as they do now, keep invested in American to ensure a decent yield return. Also, remember that when it comes to soon-to-be failures like Annaly and Invesco, it is simply smarter to go with American. You are almost guaranteed a high percentage return over the next few months, and this is a rare occurrence that should stay on every investors mind when investing into any stock.
Stocks Discussed: AGNC, NLY, ARR, IVR,