Title: Why AGNC Investment isn't and won't be a Buying Proposition in 2024 and 2025
AGNC Investment, currently sporting a hefty 15% dividend yield, might pique the interest of many dividend investors. However, before diving in headfirst, it's crucial to delve deeper.
AGNC's Yield History: A Double-Edged Sword
Over the years, AGNC Investment has maintained a consistently high yield, averaging around 14% - including the period post-Initial Public Offering (IPO). This might seem appealing, but it's essential to remember that the yield is calculated by dividing the annualized dividend by the stock price. If the dividend is decreasing, as it has in AGNC's case, the only way to maintain a high yield is if the stock price also falls. This outcome would leave dividend investors with reduced income and a shrunken nest egg, which isn't an ideal scenario.
AGNC's Purpose: Total Return and Mortgage Exposure
If you're a dividend investor, AGNC Investment might not be your cup of tea in 2024, nor is it likely to be in 2025. However, it could be a lucrative pick for those willing to reinvest their dividends. AGNC's goal is to deliver total return, not just income, and its primary focus is on providing investors with exposure to the mortgage market given its mortgage securities ownership. For those investing according to an asset allocation model, including mortgage exposure, AGNC Investment might prove a fruitful choice.
Caveats and Considerations for Prospective Investors
Before diving into AGNC Investment, it's essential to have a solid understanding of the investment's complexities. Factors like interest rate sensitivity, dividend sustainability, valuation, historical dividend cuts, and competitive landscape must be carefully assessed. Investors must also consider their risk tolerance and be prepared to reinvest dividends to achieve the desired total return.
By thoroughly analyzing these aspects, dividend investors can make an informed decision on whether AGNC Investment is a suitable investment for their portfolio.
Investing in AGNC Investment could potentially yield high returns, given its historically high dividend yield. However, it's important to note that this yield is partly sustained by the decreasing dividend and the potential fall in stock price.
For those considering AGNC Investment as part of an asset allocation model, its focus on delivering total return and providing exposure to the mortgage market could make it an attractive choice.
