AGNC Investment Corp. (NASDAQ: AGNC) offers a very high dividend yield, above 15%, which can attract income-focused investors. However, this high yield comes with risks that require careful consideration.
What Does AGNC Do?
Unlike typical real estate investment trusts (REITs) that own and rent physical properties, AGNC is a mortgage REIT. It invests in mortgage-backed securities (MBS), which are complex financial products made from pools of home loans. The value of these securities depends heavily on factors like interest rates and mortgage repayments, which can change quickly and unpredictably. This complexity makes AGNC a challenging investment for most individual investors.
Recent Financial Performance
In the first quarter of 2025, AGNC reported earnings per share (EPS) of $0.44, beating analyst expectations of $0.40, though revenue slightly missed forecasts at $846 million. The company declared a dividend of $0.36 per share for the quarter, maintaining a strong dividend yield around 15%.
AGNC’s total assets grew to $78.9 billion, up from $73.3 billion at the end of 2024. Despite a small decline in tangible net book value per share to $8.25, the company showed a positive economic return of 2.4% and a favorable net spread and dollar roll income of $0.44 per share.
Valuation and Stock Price Insights
AGNC’s tangible net book value per share (a rough measure of its portfolio’s value) was $8.25 at the end of Q1 2025, down from $13.12 in early 2022. The stock price often trades above this book value, sometimes significantly so.
For example, the 52-week high was $10.85, well above the book value, which benefits existing shareholders when the company issues new shares at a premium. However, the stock has also dipped below book value, with a 52-week low of $7.85, which could present a buying opportunity for investors seeking value.
Risks and Considerations
AGNC is not suitable for conservative investors due to the volatility in its dividend and stock price over the past decade. The company focuses on total return, which includes reinvested dividends and stock price appreciation, rather than just income. Buying shares at or below tangible book value may improve the chance of positive returns, but purchasing at high prices can lead to poor results despite the high dividend yield.
Conclusion
AGNC Investment Corp. offers a compelling high dividend yield and has shown resilience in a volatile market. However, its complex mortgage-backed securities portfolio and fluctuating book value require investors to be cautious. The stock may be worth buying when priced near or below its tangible net book value, but paying a premium demands confidence in future portfolio appreciation. As of now, some analysts remain cautious, and AGNC was not included in top stock picks by leading advisors.
