AGNC Investment (NASDAQ: AGNC) offers a very high dividend yield of about 16%, which attracts many income-focused investors. However, this mortgage real estate investment trust (mREIT) faces complex risks that make it a challenging investment.
Unlike traditional REITs that own physical properties, AGNC invests in mortgage-backed securities (MBS) guaranteed by government agencies like Fannie Mae and Freddie Mac. The value of these securities depends heavily on interest rates and mortgage prepayment rates, which can change quickly and affect AGNC’s portfolio value.
AGNC reports a key metric called tangible net book value (TNBV) per share, which reflects the value of its assets. At the end of Q1 2025, TNBV was $8.25, down from $13.12 three years earlier. The stock price often trades above this book value, which benefits current shareholders when the company issues new shares at a premium.
The company’s stock price currently sits around $9.12, slightly above TNBV. Investors should be cautious about paying more than TNBV unless they expect the asset value to rise. Buying below TNBV could offer a better value.
AGNC has struggled due to rising mortgage rates and an inverted yield curve, which squeezed its profits. But recent signs of potential Federal Reserve rate cuts and a steepening yield curve could improve AGNC’s earnings and portfolio value. The company also hedges some risks and holds mostly fixed-rate MBS to limit prepayment risks.
While the high dividend is attractive, it is not guaranteed and has declined over the past decade. AGNC’s stock is a high-risk, high-reward play that may suit investors comfortable with mortgage market volatility and seeking income.
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