Should You Hold AGNC Investment (AGNC) for Its Dividend Yield?
With the ongoing economic uncertainty, the focus has shifted to investing in quality companies with a consistent track of paying dividends. Obviously, this brings us to the REITs because solid dividend payouts are arguably the biggest enticements for REIT investors. One such REIT is AGNC Investment Corp. AGNC.
Income-seeking investors still have a large appetite for REIT stocks, as U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends. As for AGNC, the company has a record of paying monthly dividends. Since its IPO through Oct 15, 2023, the mREIT has paid out dividends of $46.84 per share.
Amid the pandemic-led market volatility, in April 2020, the company slashed its dividend to 12 cents from 16 cents paid out earlier, and has continued to pay the same amount in later periods.
On Nov 8, 2023, AGNC Investment announced a dividend of 12 cents per share for November 2023. The dividend will be paid out on Dec 11 to shareholders of record as of Nov 30, 2023.
Considering the Nov 29 closing price of $8.95 per share, AGNC’s current dividend yield is 16.1%. This is impressive compared with the industry’s average of 11.5% and attracts investors as it represents a steady income stream.
AGNC Investment Corp. Dividend Yield (TTM)
AGNC Investment Corp. dividend-yield-ttm | AGNC Investment Corp. Quote
Dividends aside, AGNC has a share repurchase plan in place. In 2022 and 2021, the company repurchased 4.7 million shares and 17.7 million shares for $51 million and $281 million, respectively. With no repurchases done in the first nine months of 2023, $1 billion remained under this program for repurchase through Dec 31, 2024.
The buyback program will enable it to respond to the volatility in its stock and boost shareholders’ wealth.
Also, AGNC Investment enjoys a decent financial position. It has solid access to attractive funding across a broad spectrum of counterparties and financing conditions. As a result, it has flexibility in the opportunistic enhancement of its portfolio. AGNC Investment’s liquidity as of Sep 30, 2023, including cash and unencumbered Agency assets, was $3.6 billion.
Operating at a conservative leverage level, in anticipation of any spread widening, will enable the company to deploy capital in investment opportunities in the upcoming period and sustain dividend payments.
This aside, the long-term investment outlook for its new Agency MBS investments remains positive due to wider spreads and higher expected demand. Moreover, as the Fed gradually slows the pace of rate hikes, interest rate volatility will decrease and create a favorable macroeconomic backdrop for Agency MBS investments.
Hence, with $55.9 billion of Agency mortgage-backed securities (MBS) in its investment portfolio (as of Sep 30, 2023), AGNC Investment is expected to enjoy attractive risk-adjusted returns within the fixed-income markets.
However, market conditions are likely to be challenging in the near term with monetary policy tightening, whereas spread widening may affect book value. Robust returns are expected to remain elusive as risk management needs to be prioritized.
Over the past year, shares of AGNC have declined 11.1% compared with the industry’s fall of 13.7%.
Image Source: Zacks Investment Research
AGNC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other REIT Stocks With Attractive Dividend Yields
Banking stocks like Arbor Realty Trust ABR and Brandywine Realty Trust BDN are worth a look, as these, too, have robust dividend yields.
Considering the Nov 29 closing price, ABR’s dividend yield is pegged at 14.23%. In the past six months, shares of ABR have declined 4.1%
Based on the last day’s closing price, Brandywine Realty’s dividend yield is pinned at 13.3%. In the past six months, shares of BDN have gained 15.6%.
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AGNC Investment Corp. (AGNC) : Free Stock Analysis Report
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