AGNC insider buying: CEO Kain’s $1.89 mil buy makes the mREIT’s 11.5% yield look good.


American Capital Investment Corp (AGNC) insider buying by CEO and CIO Gary Kain suggests the current neutral interest rate environment is supportive of AGNC’s 11.5% dividend yield.

Kain bought $1.89 million of the gov’t-back mortgage REIT on May 28. Kain’s Form 4 disclosed a $1.65 million purchase of common AGNC shares at $16.92 and small purchases of Series D preferred AGNC shares.

The AGNC insider buying by the company’s long-time portfolio manager is significant as it reverses historical selling by Kain, and implies the CEO foresees stable economic conditions for AGNC’s portfolio going forward.

Kain has a long insider trading history at AGNC, dating back to 2009 when he was appointed CIO. From 2015-16 Kain was an open market seller of AGNC, disposing of $11.45 million of the stock via planned trades. He last bought AGNC stock in Oct. of 2013, when the mREIT’s shares were under pressure. His buying proved timely, as AGNC stock soon put in a bottom.

After monthly dividend cut to $0.16, AGNC’s yield is 11.5%

Kain’s AGNC insider buying comes after the REIT announced a dividend cut to $0.16 per month, down from the $0.18 per month paid since August of 2016. Based on AGNC’s May 29 $16.68 close, the new monthly dividend rate represents an annualized yield of 11.51%.

Kain’s buying also comes as expectations for higher interest rates fades. As signs of economic slowing increase, investors are betting that the Fed has adopted a more neutral monetary policy. A low-volatility interest rate environment could be beneficial for the portfolio of mortgage securities managed by Kain.

AGNC was founded in 2008. The company is structured as a real estate investment trust (REIT) that invests in agency mortgage-backed securities. It pays out all income via dividends. So called mREITs make their money by receiving interest from investments in home mortgage-backed securities, or MBS, that are insured against default by Fannie Mae, Freddie Mac, or Ginnie Mae. Since these are essentially government backed securities, with virtually no default risk, the yield on these MBS is low. AGNC uses leverage to increase yield. It then hedges against volatility and risk.

Under Kain’s management, AGNC has an average total return of nearly 15% since 2009.

Since the first quarter of 2009, when Gary Kain took over management of AGNC, the REIT has paid $38.34 in dividends. Over that period, reinvesting dividends in AGNC shares would have produced an average annual total return of nearly 15%.

But there have been bumps along the road. For instance, in mid-2013, AGNC’s share price fell 38% over the course of three months due to mortgage-backed securities volatility as fears of rising interest rates spooked investors.

AGNC insider trading history of Gary D. Kain

Filing DateCompanySymbolTransactionTrade Date Shares Avg. Price Total 
29-May-2019American Capital Agency Corp.AGNCMarket Purchase28-May-2019         97,802 17.73 $ 1,733,720
29-May-2019American Capital Agency Corp.AGNCMarket Purchase24-May-2019           7,500 17.01 $    127,575
29-May-2019American Capital Agency Corp.AGNCPurchase24-May-2019           1,300           25.14* $      32,682
29-May-2019American Capital Agency Corp.AGNCPrivate Purchase24-May-2018           7,500 17.01 $    127,575
30-Aug-2016American Capital Agency Corp.AGNCMarket Sale (Planned)26-Aug-2016           3,931 19.76 $      77,677
07-Jul-2016American Capital Agency Corp.AGNCMarket Sale (Planned)05-Jul-2016       368,953 19.55 $ 7,211,480
25-Mar-2016American Capital Agency Corp.AGNCMarket Sale (Planned)23-Mar-2016         46,045 18.54 $    853,688
18-Mar-2016American Capital Agency Corp.AGNCMarket Sale (Planned)15-Mar-2016         47,956 18.12 $    869,145
11-Mar-2016American Capital Agency Corp.AGNCMarket Sale (Planned)10-Mar-2016         21,103 18.13 $    382,526
19-Feb-2016American Capital Agency Corp.AGNCMarket Sale (Planned)19-Feb-2016           7,747 17.96 $    139,136
25-Mar-2015American Capital Agency Corp.AGNCMarket Sale (Planned)24-Mar-2015         40,516 21.81 $    883,569
25-Mar-2015American Capital Agency Corp.AGNCMarket Sale (Planned)23-Mar-2015                67 21.79 $        1,460
17-Mar-2015American Capital Agency Corp.AGNCMarket Sale (Planned)17-Mar-2015           6,371 21.46 $    136,695
16-Mar-2015American Capital Agency Corp.AGNCMarket Sale (Planned)13-Mar-2015         42,220 21.12 $    891,594
31-Oct-2013American Capital Agency Corp.AGNCMarket Purchase30-Oct-2013           5,000 21.66 $    108,300
31-Oct-2013American Capital Agency Corp.AGNCMarket Purchase30-Oct-2013         20,000 21.66 $    433,200
01-Aug-2013American Capital Agency Corp.AGNCMarket Purchase31-Jul-2013         25,000 22.44 $    561,000
08-Aug-2012American Capital Agency Corp.AGNCMarket Purchase07-Aug-2012         20,000 32.75 $    655,000
03-Feb-2011American Capital Agency Corp.AGNCMarket Sale01-Feb-2011              755 28.76 $      21,715
01-Nov-2010American Capital Agency Corp.AGNCMarket Purchase29-Oct-2010           2,500 28.5 $      71,250
12-Jul-2010American Capital Agency Corp.AGNCMarket Sale (Planned)09-Jul-2010              778 27.45 $      21,360
28-May-2010American Capital Agency Corp.AGNCMarket Purchase27-May-2010           1,300 25.64 $      33,332
14-Aug-2009American Capital Agency Corp.AGNCMarket Purchase14-Aug-2009           7,000 23.32 $    163,261

Interest rate volatility is a challenge for AGNC. However, we may be in a “Goldilocks” period for AGNC, as the Federal Reserve adopts a neutral monetary policy.

AGNC CEO Kain: Stable interest rate environment “clearly a major positive for our portfolio.”

In AGNC’s post Q1 earnings conference Kain had this to say about the economic landscape over the last two quarters:

The equity and credit markets have recovered as the more dovish central bank policies and corresponding lower interest rates have offset rather than eliminated concerns around the global economy. The markets are clearly not expecting more accommodative monetary policy to produce a return to global synchronous growth or materially impact the inflation picture. This is evidenced by both the flat yield curve and the fact that longer term interest rates are much lower than they were six months ago.

So, what does this mean for AGNC as we look ahead? A stable interest rate environment with the Fed that is unlikely to either raise or cut interest rates is clearly a major positive for our portfolio. It significantly reduces the likelihood that our economic returns will be negatively impacted by interest rate volatility. Said another way, the probability of us achieving attractive economic returns is materially higher when interest rates are stable and convexity costs are minimal.

One can read Kain’s $2 million AGNC purchase as confirmation that the mREITs long-time portfolio manager expects favorable conditions for AGNC’s operations going forward.


Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this blog is meant for educational and informational purposes only. Do your own research before investing and don’t risk more than you can afford to lose. This article expresses my own opinions, and I am not receiving compensation for it (other than from WhaleWisdom). I do not have a business relationship with any company whose stock is mentioned in this article. I or my associates may hold positions in the stocks discussed.