Fannie and Freddie: Thursday Financial Stock Winners (Update 2)

Updated from 2:06 p.m. ET with market close information.

NEW YORK ( TheStreet) -- Fannie Mae ( FNMA) and Freddie Mac ( FNMA) were the financial stock winners on Thursday, after the government sponsored enterprises (GSEs) announced their third-quarter results.

Following a delay in trading because OTC Markets was unable to open trading on Thursday because of a "connectivity issue," according to a Wall Street Journal report, Fannie Mae's common shares rose nearly 5% to close at $2.41, while Freddie's shares were up nearly 3% to close at $2.27.

The GSEs were taken under government conservatorship at the height of the credit crisis in September 2008. The U.S. Treasury holds $117.1 billion senior preferred Fannie Mae shares and $72.3 billion in senior preferred Freddie Mac shares. Under their modified bailout agreements, the GSEs must pay all earnings to the government in excess of minimal capital cushions of $3 billion apiece.

Fannie reported third-quarter earnings of $8.7 billion, increasing from $1.8 billion a year earlier. The company said it would make an $8.6 billion dividend payment to the Treasury in December. Following that payment, Fannie will have paid the U.S. government dividends totaling $114 billion.

Freddie Mac on Thursday reported third-quarter pre-tax earnings of $6.5 billion, increasing from $4.9 billion in the third quarter of 2013. But the company's after-tax earnings for the third quarter jumped to $30.5 billion because of a $23.9 billion release from the company's valuation allowance for deferred tax assets (DTA).

Fannie Mae recaptured its DTA during the first quarter.

Freddie said it would make a $30.4 billion dividend payment to the Treasury in December, bringing its total dividends paid to Uncle Sam to $71.3 billion.

So the government in December will have received $185.3 billion in dividends from Fannie and Freddie, for a five-year investment of $189.4 billion. That's a nifty return in a little over five years, and there's still no mechanism in place for either GSE to repurchase any government-held preferred shares.

Meanwhile, investors holding common and junior preferred shares of Fannie and Freddie have been out in the cold since September.

But with the GSEs making so much money, investors have made plays in common and junior preferred GSE shares, hoping to recapture some value.

Fannie's preferred Series S shares, which have a $25 par value and trade under the ticker FNMAS, rose 3% to close at $8.25. The shares have risen 394% $1.67 at the end of 2012.

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