AGNC Investment Stock: Buy, Sell, or Hold?

Motley Fool11-21 16:23

AGNC pays a much higher yield than most REITs. But it's also underperformed many other REITs and the S&P 500. It looks cheap, but it faces a lot of credit and interest rate risks. AGNC ...

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height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAGNC Investment Stock: Buy, Sell, or Hold?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-21 16:23 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.fool.com/investing/2024/11/21/agnc-investment-stock-buy-sell-or-hold/><strong>Motley Fool</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>AGNC pays a much higher yield than most REITs.\n\n\n\n\n\n\n\nBut it's also underperformed many other REITs and the S&P 500.\n\n\n\n\n\n\n\nIt looks cheap, but it faces a lot of credit and interest rate risks.\n\nAGNC ...</p>\n\n<a href=\"https://www.fool.com/investing/2024/11/21/agnc-investment-stock-buy-sell-or-hold/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"HUD","symbol_name":"Hudson Ltd.","start_time":0,"source_url":"https://www.fool.com/investing/2024/11/21/agnc-investment-stock-buy-sell-or-hold/","article_id":"2485452981","we_media_id":null,"thumbnails":["https://g.foolcdn.com/image/?url=https%3A%2F%2Fg.foolcdn.com%2Feditorial%2Fimages%2F798159%2Ftumbling-real-estate-market-dangerous.jpg&op=resize&w=165&h=104"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485452981","pubTimestamp":1732177380,"sourceInfo":{"source_id":"fool_stock","name":"Motley Fool"},"weMediaInfo":null,"summary":"Is it the right time to buy this REIT for its 15% yield?","collect":0,"end_time":0,"defaultTopTitle":"fool.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"HUD":"Hudson Ltd.","BK4585":"ETF&股票定投概念","REIT":"ALPS Active REIT ETF","BK4588":"碎股","BK4110":"抵押房地产投资信托","AGNC":"美国资本代理公司","CFA":"VictoryShares US 500 Volatility Wtd ETF"},"translate_title":"AGNC投资股票：买入、卖出还是持有？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AGNC":1,"HUD":1,"REIT":1,"CFA":0.9},"content_text":"AGNC pays a much higher yield than most REITs.\n\n\n\n\n\n\n\nBut it's also underperformed many other REITs and the S&P 500.\n\n\n\n\n\n\n\nIt looks cheap, but it faces a lot of credit and interest rate risks.\n\nAGNC Investment (AGNC -0.21%), a real estate investment trust (REIT) that invests in residential mortgage-backed securities, is a divisive investment for dividend investors. The bulls love its massive forward yield of 15%, while the bears argue that it's a high-yield trap that has generated dismal gains for its income-oriented investors. Let's review AGNC's business model and see if it's smarter to buy, sell, or hold its stock.How does AGNC make money?Many REITs buy properties, rent them out, and split the rental income with their investors. However, mortgage REITs (mREITs) like AGNC don't purchase any properties -- they only offer their own mortgages or purchase mortgage-backed securities (MBSes) to generate interest income.Image source: Getty Images.Like other REITs, mREITs need to distribute at least 90% of their taxable earnings as dividends to maintain a favorable tax rate. That might sound like a stable business model, but it's also highly exposed to a wide range of interest rate, prepayment, credit, and rollover risks.If interest rates are too low, mREITs will generate less interest income. Borrowers could also refinance their loans at lower rates or sell their underlying properties as mortgage rates decline. But if interest rates are too high, the market's demand for new mortgages will dry up and throttle its future growth. Borrowers also tend to borrow money at lower short-term rates than higher long-term rates, so an inversion of the yield curve (when short-term rates rise higher than long-term rates) could prevent them from consistently \"rolling over\" their loans to more attractive interest rates as they mature.All of these unpredictable issues make mREITs riskier and more volatile than traditional REITs. That said, mREITs also tend to pay out much higher yields than REITs because they take on more risk and generate higher profits.AGNC Investment Corp.\" current_price=\"9.65\" daily_high=\"9.68\" daily_low=\"9.55\" default_period=\"FiveYear\" dividend_yield=\"14.92%\" exchange=\"NASDAQ\" fifty_two_week_high=\"10.85\" fifty_two_week_low=\"8.57\" gross_margin=\"100.00\" logo=\"https://g.foolcdn.com/art/companylogos/mark/AGNC.png\" market_cap=\"$9B\" pe_ratio=\"6.75\" percent_change=\"-0.21\" symbol=\"AGNC\" volume=\"458\">The reasons to buy or hold AGNCAGNC allocates over 98% of its portfolio to agency MBS assets backed by Fannie Mae, Freddie Mac, or Ginnie Mae. Fannie and Freddie are both government-sponsored enterprises, and Ginnie is a government-owned organization within the U.S. Department of Housing and Urban Development (HUD).AGNC says that government support \"substantially eliminates credit risk and protects us in the event borrowers default on their mortgage payments.\" It only allocates the remaining sliver of its portfolio to non-agency investments that give it more \"meaningful flexibility in the event of significant shifts in market opportunities\". Therefore, AGNC is a bit safer than other mREITs that invest in non-agency MBSes and riskier mortgages.AGNC is also one of a handful of mREITs that has an exclusive \"captive\" broker-dealer. It holds that deal with Bethesda Securities -- a member of the Fixed Income Clearing Corporation (FICC) and the Financial Industry Regulatory Authority (FINRA) -- to gain access to lower wholesale funding rates and lower collateral requirements than other mREITs that have non-captive deals with their brokers and dealers. AGNC is also one of the few mREITs that pays monthly dividends, and its trailing payout ratio remains comfortably below 100%. It also looks cheap with a price-to-book ratio of 1.1.The reasons to sell or avoid AGNCThe bears will point out that although AGNC might pay out hefty dividends, it's woefully underperformed the market and many of its peers. Over the past decade, AGNC's stock price declined by 58%. It also cut its dividend by 25% to cope with the pandemic in 2020, and it hasn't raised its payout over the past four years.If you had reinvested your dividends, AGNC would have generated a total return of 38% over the past 10 years. That outcome seems better, but many investors buy REITs for reliable cash dividends instead of reinvesting those payments. The S&P 500 delivered a total return of 245% during that decade.By comparison, Realty Income -- the bellwether of the retail REIT sector -- advanced 27% and generated a total return of 101% during that same period. It also consistently raised its dividends throughout the pandemic. Simply put, AGNC doesn't stack up too well against the market or traditional REITs.Is it the right time to buy, sell, or hold AGNC?AGNC looks cheap and pays a high yield, but its high exposure to various credit and interest rate risks makes it less appealing than other REITs. So for now, I'd sell or avoid this stock (as well as most mREITs) and stick with evergreen retail REITs like Realty Income instead.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485452981"}