How will the issuance of 12,000,000 depositary shares at a $25 liquidation preference affect AGNC's earnings per share and dilution?

Impact on EPS & Dilution

The offering adds 12 million depositary shares to the capital structure. At the time of the announcement AGNC had roughly 100 million shares outstanding (≈ ≈ 120 million after the deal). That represents an ≈ 12 % increase in share count, so, all else equal, earnings per share (EPS) will be diluted by roughly the same magnitude. The $25 liquidation‑preference does not affect the income statement; it merely sets a floor price at which investors can force redemption, so the immediate EPS impact comes from the larger denominator, not from any expense.

However, the gross proceeds of ≈ $300 million (≈ $285 million net after fees) will sit on the balance sheet and can be deployed into AGNC’s core mortgage‑backed‑security (MBS) portfolio. If the firm can generate an incremental net investment income that exceeds its cost of capital (the yield on the newly‑issued preferred‑style shares is effectively the $25 redemption floor, not a coupon), the dilution could be offset or even reversed over the medium term. In the near‑term, EPS will likely dip modestly, but the cash infusion gives the REIT room to boost total earnings and support its dividend payout.

Trading Implications

• Short‑term: Expect modest price pressure as the market prices in the 12 % share‑count expansion. Watch the stock’s discount/premium to NAV; a widening discount can create a buying opportunity for investors who believe the cash will be efficiently invested.
  
• Medium‑term: Track net investment income growth and redemption activity. If AGNC deploys the proceeds into higher‑yielding MBS and the redemption rate stays low, EPS should recover, supporting the dividend and potentially narrowing the NAV discount.
  
• Actionable signal: Consider a long‑biased position (e.g., buying on dips or using a modest call‑option spread) if the stock trades at a ≥ 5 % discount to its NAV per share after the announcement, with stop‑loss near the recent low‑NAV premium level. Conversely, if the discount widens dramatically or redemption pressure spikes, a short‑term hedge or exit may be prudent.