Core Insights - Hoya Capital Research & Index Innovations is affiliated with Hoya Capital Real Estate, providing investment advisory services focused on publicly traded securities in the real estate industry [2] - The commentary published by Hoya Capital is intended for informational and educational purposes only, and does not constitute investment, tax, or legal advice [2] - The views expressed in the commentary are subject to change and should not be considered a complete analysis of the subjects discussed [2] Company and Industry Summary - Hoya Capital Real Estate is a registered investment advisory firm based in Rowayton, Connecticut, serving ETFs, individuals, and institutions [2] - The firm offers non-advisory services including market commentary, research, and index administration [2] - The commentary emphasizes that past performance is not indicative of future results and that investing involves risks, particularly in real estate and housing industry sectors [3]

Core Viewpoint - Realty Income and Vici Properties are suggested as better REIT options for income investors compared to AGNC Investment, which has a high yield but faces declining profitability due to interest rate cuts [1][4]. Group 1: AGNC Investment Overview - AGNC Investment is a mortgage REIT with a significant 14% yield, focusing on originating mortgages and investing in mortgage-backed securities [1]. - The company allocates 89.4% of its $73.3 billion portfolio to agency MBS assets to mitigate housing crisis risks [2]. - In 2024, AGNC's net spread and dollar roll income per share fell 28% to $1.88 due to the Federal Reserve's interest rate cuts [2]. - Analysts predict a further 15% decline in net spread and dollar roll income for 2025, estimating it to drop to $1.60 per share [3]. Group 2: Realty Income Overview - Realty Income is a retail REIT owning approximately 15,600 properties, with major tenants including Dollar General and Walgreens [5]. - The company has maintained an occupancy rate above 96% since its IPO in 1994, indicating resilience despite tenant struggles [6]. - Realty Income has raised its dividend 130 times since 1994, currently offering a forward yield of 5.7% [7]. - From 2014 to 2024, its adjusted funds from operations (AFFO) per share grew at a CAGR of 5%, with expectations for 2025 to reach $4.22-$4.28 per share [8]. Group 3: Vici Properties Overview - Vici Properties is an experiential REIT with a portfolio of 93 casino and entertainment properties, maintaining a 100% occupancy rate since its IPO in 2018 [9]. - The company has locked tenants into long-term leases with rent increases tied to the consumer price index, ensuring rent growth aligns with inflation [9]. - Vici's AFFO per share grew at a CAGR of 8% from 2018 to 2024, with expectations for 2025 to reach $2.32-$2.35 per share [10]. - The forward annual dividend rate is $1.73 per share, resulting in a forward yield of 5.5% [10].

Company Performance - AGNC Investment (AGNC) closed at $10.13, reflecting a -0.39% change compared to the previous day, underperforming the S&P 500 which gained 1.77% [1] - Over the last month, AGNC shares decreased by 3.51%, while the Finance sector lost 1.46% and the S&P 500 lost 5.73% [1] Earnings Projections - The upcoming earnings report for AGNC is projected to show earnings per share (EPS) of $0.40, a decrease of 31.03% from the same quarter last year [2] - Revenue is estimated at $155.42 million, representing an increase of 618.05% from the prior-year quarter [2] Full Year Estimates - For the full year, earnings are projected at $1.61 per share, a decline of 14.36% from the previous year, while revenue is expected to be $754 million, an increase of 4088.89% [3] - Recent revisions to analyst forecasts for AGNC are important as they reflect short-term business trends and analyst sentiment [3] Valuation Metrics - AGNC Investment is currently trading at a Forward P/E ratio of 6.31, which is lower than the industry average Forward P/E of 8.57, indicating a discount [6] - The REIT and Equity Trust industry, part of the Finance sector, has a Zacks Industry Rank of 202, placing it in the bottom 20% of over 250 industries [6] Zacks Rank System - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), has shown a strong track record, with 1 rated stocks averaging an annual return of +25% since 1988 [5] - AGNC Investment currently holds a Zacks Rank of 3 (Hold), with the consensus EPS estimate remaining unchanged over the last 30 days [5]

Core Insights - The article highlights three high-yield dividend stocks with an average yield of 10.25%, which can provide significant monthly income for investors [1][3]. Group 1: Dividend Stock Performance - A study by Hartford Funds and Ned Davis Research shows that dividend-paying stocks have significantly outperformed non-payers over the past 50 years, with annualized returns of 9.17% compared to 4.27% [2]. - Companies that consistently pay dividends are characterized by their long-term outperformance and ability to navigate economic challenges [5]. Group 2: AGNC Investment - AGNC Investment offers a 13.99% yield and has maintained a double-digit yield in 14 of the last 15 years, making it a strong candidate for generating monthly income [4]. - The company is expected to benefit from a rate-easing cycle initiated by the Federal Reserve, which historically improves the performance of mortgage REITs [7][10]. - AGNC focuses on agency assets, which are backed by the federal government, allowing it to leverage its mortgage-backed securities investments while sustaining high dividend yields [9]. Group 3: Realty Income - Realty Income provides a 5.7% yield and has increased its dividend for 110 consecutive quarters, showcasing its reliability [11]. - The company owns over 15,600 commercial real estate properties, with 91% considered resilient to economic downturns [12]. - Realty Income's tenant vetting process and low rental delinquencies contribute to its strong occupancy rate of 98.2%, which is significantly higher than the S&P 500 REITs average [14]. Group 4: PennantPark Floating Rate Capital - PennantPark Floating Rate Capital offers an 11.06% yield and focuses on debt investments in middle-market companies, which typically pay higher interest rates due to limited access to financial services [16][18]. - The company's entire debt portfolio is variable rate, allowing it to benefit from rising interest rates, and it has maintained a low delinquency rate of 0.4% [19][20]. - Currently trading at a 2% discount to its book value, PennantPark presents an attractive opportunity for income-seeking investors [20].

Core Viewpoint - AGNC Investment is primarily recognized for its high dividend yield of 14%, attracting dividend investors, but its focus is on total returns rather than consistent income generation [1][3]. Company Overview - AGNC Investment operates as a mortgage real estate investment trust (REIT), which involves buying mortgages pooled into bond-like securities, making it more complex than traditional property-owning REITs [2][3]. - The company employs leverage to enhance returns, which is backed by the value of its mortgage securities portfolio [2]. Financial Performance - Since its inception, AGNC Investment has averaged a total return of about 10% per year, aligning with broader market expectations [4]. - In 2024, AGNC paid out $1.44 per share in dividends while generating $1.88 in net spread and dollar roll income per common share, resulting in a payout ratio of approximately 77%, indicating a reasonable level of dividend safety for the near term [5]. Dividend History and Strategy - The dividend has experienced fluctuations, including a spike post-IPO followed by a reduction, which negatively impacted both income and capital for those relying on dividends for living expenses [6]. - Reinvesting dividends has proven beneficial for total returns, contrasting with the experience of those who spent their dividends [6]. Investment Considerations - For short-term investors seeking dividend income, AGNC Investment may be a viable option in the upcoming year [7]. - Long-term investors focused on total returns may find AGNC Investment a solid choice, but it may not suit long-term dividend investors looking for reliable income [7].

Core Insights - AGNC Investment Corp. has announced a leadership change, with Peter Federico becoming both President and CEO, and Chief Investment Officer, while Christopher Kuehl transitions to Head of Investment Research and Strategy [1][2] - The company aims to adapt to the evolving macroeconomic environment and leverage advancements in financial technology and data analysis to enhance investment decision-making and portfolio management [2][3] Company Overview - AGNC Investment Corp. is a prominent investor in Agency residential mortgage-backed securities (Agency MBS), which are backed by guarantees from Fannie Mae, Freddie Mac, or Ginnie Mae [3] - The company employs a leveraged investment strategy, primarily financing its Agency MBS assets through repurchase agreements, and utilizes dynamic risk management strategies to mitigate interest rate and market risks [3][4] Financial Performance - AGNC has a strong track record of delivering long-term returns to shareholders, having paid over $14 billion in common stock dividends since its inception [4]

Core Insights - Agency mortgage REITs are currently experiencing high price-to-book ratios, with Orchid Island Capital (ORC) also showing a premium to estimated current book value [1][5] - The REIT Forum provides weekly estimates for these REITs, allowing for more timely insights compared to quarterly updates [2] - The gap between AGNC Investment Corp. (AGNC) and other agency mortgage REITs has narrowed, with AGNC maintaining the highest price-to-book ratio [5][11] Company Performance - Mortgage REITs hold significant amounts of mortgages and hedges, with positions disclosed quarterly, allowing for modeling of projected changes in asset and liability values [3] - AGNC and Annaly Capital Management (NLY) are noted for their size, which limits their nimbleness in portfolio repositioning [8] - NLY's book value has increased moderately, indicating a high valuation compared to historical norms [11] Sector Analysis - The spread between agency MBS and Treasuries remains favorable, contributing to higher net interest income [7] - The premiums to book value for agency mortgage REITs are widening, raising concerns about the risk/reward profile [7] - Other mortgage REITs may benefit from adopting strategies similar to agency mortgage REITs to avoid trading at discounts to book value [7] Investment Strategy - Preferred shares are favored for their yield while waiting for relative value swings in common shares [14] - The current allocation to common shares in the sector is low, with a preference for mortgage REITs that are not at historically high price-to-book ratios [15] - Treasury bill ETFs are receiving increased investment, reflecting a cautious approach in the current market environment [16]

Core Viewpoint - AGNC Investment offers a high dividend yield of 14%, attracting income investors, but its long-term performance and reliability are questionable compared to Bank of Nova Scotia and Brookfield Renewable [1][3][11] AGNC Investment - AGNC Investment's dividend rose quickly after its IPO in 2008 but began to decline in 2013, leading to a falling stock price [2] - Despite a high yield above 10% for most of its existence, the declining dividend and stock price resulted in less income and capital for investors [3] - The mortgage REIT sector is volatile, and dividend cuts are common, making AGNC Investment less favorable for long-term dividend investors [4][11] Bank of Nova Scotia - Bank of Nova Scotia has paid dividends since 1833, with a generally upward trend, although it did not increase its dividend in 2024 [5] - The bank is focusing on the U.S., Mexico, and Canada, having acquired a stake in KeyCorp to enhance its U.S. presence, and expects to resume dividend increases in 2025 [6] - The bank's current yield of 6.1% is attractive, and it is seen as a reliable dividend payer for long-term investors [6][7][11] Brookfield Renewable - Brookfield Renewable operates a diversified clean energy portfolio, including hydroelectric, solar, wind, storage, and nuclear assets [8] - The partnership share class offers a yield of 6.5%, while the corporate shares yield 5.2%, with a history of regular dividend increases [9] - Brookfield Renewable employs an active management approach, buying and improving clean energy assets, making it comparable to financial companies [9][10] - Its steadily rising dividend and high yield present an attractive alternative to AGNC Investment [10]

Core Viewpoint - AGNC Investment Corp. preferred shares are currently trading around $25, with a stripped yield of 6.11%, but a floating rate is expected to increase the yield to approximately 9.23% soon [1] Dividend Yield - The upcoming yield of around 9.26% is considered decent, positioning AGNC preferred shares among the lower risk options available [4] Potential Capital Gain - The yield to call is approximately 4.3%, which is annualized and not particularly exciting for investors [3] Floating Spread - The floating spread is set at 4.697% + 3-month SOFR + 0.26161%, which is average for preferred shares rated between 1.0 to 2.0 in risk [5] Market Context - Other AGNC preferred shares are trading at negative yields to call, indicating that investors are paying a premium for slightly higher floating spreads [6] - AGNC Investment Corp. 6.875 DEP REP D (AGNCM) is mentioned as a viable alternative, but AGNCP is preferred due to its better spread and similar yield to call [7] Investment Strategy - The current valuation does not present a compelling reason to add to the position, with a target buying range indicating a 6% difference between overpriced and reasonably priced shares [11] - The company acknowledges the impracticality of categorizing every investment as a buy or sell, emphasizing the importance of relative pricing opportunities [12]

Core Viewpoint - AGNC Investment offers a high monthly dividend yield of approximately 14%, significantly exceeding the S&P 500's yield, but concerns about the sustainability of this payout exist due to its size [1] Group 1: Dividend Sustainability - The dividend payout ratio is a critical metric for most dividend stocks, but AGNC Investment's use of leverage complicates this assessment [2] - The company employs dynamic risk management strategies to safeguard its portfolio from risks, which differentiates it from typical dividend stocks [2] Group 2: Earnings and Dividend Policy - Earnings-based financial metrics are not the best indicators of dividend stability for AGNC Investment, as stated by CEO Peter Federico [3] - Federico emphasized that the company focuses on current earnings rather than long-term earnings potential when determining its dividend policy [3] Group 3: Key Financial Metrics - The CEO highlighted that the total cost of capital hurdle rate versus expected return is crucial for dividend considerations, requiring a return on equity (ROE) of 16.7% to cover expenses and dividends [4] - Currently, the portfolio's ROE is between 17% and 18.5%, which aligns with the cost of capital and supports the maintenance of the dividend [5]