Is AGNC Investment Corp's 14.9% Dividend A Yield Trap?

A high yield is not the only thing to consider when determining a good income stock. Some high-yield stocks are value traps that lure less-savvy investors into troubled companies. This explains why it's important to conduct thorough research before settling on a dividend stock. 

To help you stay on top of your investing game, we analyzed AGNC Investment Corp's AGNC high yield to determine if it's a good income stock or a potential value trap. AGNC is the world’s second-largest mortgage REIT, with a market cap of $7.022 billion. The REIT invests in agency-backed residential mortgage-backed securities and claims its goal is to generate superior long-term stockholder returns with a substantial yield component.

AGNC currently offers an annualized dividend yield of 14.91%, over 10X the S&P 500 dividend yield of 1.47%. To determine if this yield is sustainable, we looked at the REIT's dividend payment history and its fundamentals. AGNC has a shaky dividend history, with rapid ups and downs for the last 10 years.

Furthermore, its stock has demonstrated significant volatility, experiencing a 50% decline over the past 5 years. This decline is a key factor in the maintenance of its high yield, despite the decrease in dividends. AGNC's book value per share has also seen a significant drop, from $23.93 in 2013 to just $8.84 per share at the end of Q1 2024. This decline in book value is a clear indication of a weakening financial position and an inability to sustain its dividend payments, highlighting the potential risks of high-yield stocks.

While AGNC may show signs of recovery with declining interest rates, it still has a significant journey ahead to support its high-yield dividends. Its volatility further underscores the need for caution, making it less favorable for income investing. 

There Are Better High-Yield Opportunities

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For example, the Jeff Bezos-backed investment platform just launched its Private Debt Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

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