The Federal Agricultural Mortgage Corp. (AGM), also referred to as Farmer Mac, is a stockholder-owned, indirect government-sponsored enterprise — or what is known as a GSE, explains Marty Fridson, editor of Forbes/Fridson Income Securities Investor.
AGM is regulated by the Farm Credit Administration, an independent agency in the executive branch of the U.S. Government. As a federally chartered subsidiary agency of the government, Farmer Mac operates through four segments: Farm & Ranch, United States Department of Agriculture Guarantees, Rural Utilities, and Institutional Credit.
The GSE establishes a secondary market for agricultural real estate and also provides rural housing mortgage loans. Farmer Mac was created by Congress to improve the availability of long-term credit for the nation’s farmers, ranchers, rural homeowners, and related businesses and communities.
The agency further fulfills its mandate by providing a secondary market for qualified agricultural mortgage loans, rural housing and utilities loans, and the guaranteed portions of agricultural and rural development loans.
AGM reported 2Q 2021 core net income of $30.0 million or $2.77 per share, beating analysts’ $2.62 estimates. Earnings momentum was driven by solid loan growth and margin expansion. Credit quality indicators remained strong. Spread revenue grew almost 7.0% from a year ago and capital measures saw further strengthening.
Although this investment is not guaranteed by the full faith and credit of the U.S. Government, implied support is very strong. As a result, this security is suitable for low- to medium-risk taxable portfolios. Dividends are qualified and taxed at the lower 15%-20% rate. Buy at $115.00 or lower for a 3.06% annualized yield.