A Case Study Of Financial Opportunity: AGNC and NLY

Is it possible to earn extra money with two MREIT stocks, AGNC and NLY?

Is it possible coming from meager means to earn extra income and achieve greater wealth? This article shows one way that may be possible with the beauty being that anybody can try it – from the McDonalds grunt worker to an astronaut from NASA.

I’ve traded stocks for the past 1 1/2 years. I’ve learned that I get emotional and buy on impulse. That is where I’ve lost money. However, I’ve noticed a strength in recognizing pattern and opportunity, particularly where dividend stocks are concerned and there are two, one of which I made a decent profit with, and the other which has followed the same pattern. Currently I am out of the market (except my 401K), as I recognized my impulse buying and selling and needed to take a step back.

My impulses aside, there are two stocks in particular that have shown a predictable pattern in the past and will likely show the same pattern for the foreseeable future (the next year probably). I make the disclaimer that nothing in life is guaranteed, but with these two stocks, I believe it’s pretty darn close to a guarantee if you follow the right pattern and formula.

The Two Stocks

The two stocks are AGNC (American Capital Agency) and NLY (Annaly Capital Management). Both stocks pay a very high dividend. What that means is if you own shares of the stock, you get paid a certain amount of money several times a year just for owning the stock. Some stocks payout higher than others and these two especially pay out very high compared to the overall market.

Both stocks are considered MREITs. This simply means the companies make their profit in the area of real estate. They have tax exemptions as long as they pay a high percentage of the income back to shareholders in dividends. But I’m not an expert on this type of business by any means. What I do know is that the two stocks pay high dividends and seem to be successful as long as interest rates are low. What really matters to me is the pattern the stocks are following and what might derail that pattern.

The Pattern Over the Last Few Years

Let’s look at the pattern of AGNC and NLY over the last few years. Of interest to me is when the stocks dip down in value and when they go up in value. The simple adage of buying low and selling high is what I am looking for. Hey, I like to keep it simple.


AGNC over the last year (June 30, 2010 – June 30, 2011). This is the stock I made money with – a few thousand dollars. It is a pity that I’ve lost more than that on emotional buying of other smaller stocks, which I sold in panic, with the hopes of hitting a home run .

AGNC stock


NLY over the last year (June 30, 2010 – June 30, 2011). This stock shows a pattern similar to AGNC.

NLY stock

The Pattern

On each chart, notice there is a D at certain points at the bottom. Four times a year, each of these stocks pays out a dividend. That means you get money for owning the stock. The current dividend shows AGNC will pay you about 19% of the share price over the course of a year and NLY will pay you about 14%. That means if you spend $10,000 on shares of AGNC and the share price does not increase, you will end up with roughly $11,900 at the end of a year just from the dividends (an increase of $1,900). This is called the dividend yield percentage. Obviously nothing is guaranteed, but this is the general formula.

Next notice that around the D on each chart, the stock price usually goes down a significant amount. Notice how after the price goes down after each D that the price starts climbing back up, until it approaches the next dividend and goes back down. Regardless of why this is happening, it is happening. I made my money on AGNC because I bought at the low point during the dividend dips and either sold when the price went up a couple dollars, or I waited for the dividend to be paid out and just held on to the stock. This required about $8,000 of investment, which I turned into about $11,000. So there are two strategies.

Buy After a Dividend Dip and Hold

To follow this strategy, buy the stock after a dividend dip and just hold the stock for a year. Chances are the stock price will be the same or higher and you’ll make a good percentage. And it’s darn easy too, just wait for a dividend to get paid out and jump in the next day. Then sit back and do nothing :) This does require you to wake up early and place the order for shares.

Buy At a Dividend Dip and Sell When the Price Gets High

This strategy is simply buying the stock at the low dividend dip and selling when the price gets high – usually right before the stock pays out its NEXT dividend – sometime during the week before that time. Google Finance does a good job of sharing when these dates are in the updates for each stock. This will help you if you adopt this strategy and it simply requires paying attention to dates.

What Could Go Wrong?

Interests rates could rise and the economy could blow up sending the prices spiraling. There could be other things that I’m not aware of that could make these (and other stocks like them) go down in price. However, over the past couple years they have only gone up in value and it seems in at least the short term they will continue to do so. Lastly, stocks like these somewhat frequently do SPOs (secondary public offerings) of stock, which usually will send the price down temporarily. I believe they do this to make more shares available for the public to trade.

How to Trade

Trading is very simple. For me, I went to Scottrade and setup an account. Then I learned to place orders after logging in the website. There are considerations and technical information such as bid and ask prices, but I won’t go into those for now. Suffice it to say if you setup an account with a broker like Scottrade and have at least a few thousand dollars to invest, then the simple strategy outlined here just might earn you some extra income.

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