Core Viewpoint - AGNC Investment Corp. (AGNC) and Arbor Realty Trust, Inc. (ABR) present distinct investment opportunities for income-focused investors, with AGNC being the more prudent choice due to its risk management and dividend sustainability [1]. Group 1: AGNC Investment Corp. (AGNC) - AGNC follows an active portfolio-management strategy, adjusting its portfolio and hedging against market volatility [2]. - As of March 31, 2025, AGNC has a significant hedge position covering 91% of its outstanding balance, which enhances cash flow stability and long-term growth prospects [3]. - The company holds $77.9 billion in Agency mortgage-backed securities (MBS), benefiting from government guarantees, which positions it for attractive risk-adjusted returns [4]. - AGNC's current dividend yield is 15.47%, significantly higher than the industry average of 11.98%, with a payout ratio of 81% [5]. - As of March 31, 2025, AGNC's liquidity stands at $6 billion, with a modest leverage of 7.5X, indicating a sustainable capital distribution plan [6]. - AGNC shares have appreciated by 11.7% over the past year, while it trades at a forward P/E of 5.70X, which is a discount compared to the industry average of 7.96X [11][14][17]. Group 2: Arbor Realty Trust, Inc. (ABR) - Arbor Realty focuses on loans for multi-family and commercial real estate, with expectations of improved mortgage originations as rates decline [7]. - ABR's current dividend yield is 11.37%, but it has a concerning payout ratio of 115% and recently cut its dividend by 30.3% [8]. - As of March 31, 2025, ABR's liquidity is weak, with only $508 million in cash against long-term debt of $4.8 billion, raising concerns about its capital distribution sustainability [8]. - ABR has significant exposure to underperforming multi-family loans, having foreclosed on seven non-performing loans totaling $196.7 million in Q1 2025 [10]. - The Zacks Consensus Estimate indicates a year-over-year earnings decline of 32.2% for ABR in 2025, with downward revisions suggesting a cautious outlook [19][21]. - ABR shares have declined by 16.2% over the past year and trade at a forward P/E of 8.47X, which is at a premium compared to its five-year median [11][14][17]. Group 3: Comparative Analysis - AGNC's robust interest rate hedging and strong liquidity provide stability amid market volatility, while ABR's elevated payout ratio and recent dividend cut raise concerns [22][23]. - For investors seeking stable income with lower risk, AGNC is currently the more favorable investment option compared to ABR [23].

Core Insights - AGNC Investment Corp. is adopting a proactive and defensive portfolio management strategy aimed at long-term growth by frequently adjusting asset allocations and hedging strategies to mitigate risks while seizing yield opportunities [1] Portfolio Management - The company has maintained a robust hedge position, covering 91% of its Investment Securities Repo, TBA positions, and other debt as of March 31, 2025, indicating a strong focus on protecting against interest rate volatility [2] - AGNC has strategically reduced its exposure to more volatile non-agency mortgage-backed securities (MBS) and shifted towards higher-coupon Agency MBS, which enhances prepayment probability and supports better cash flow visibility [3] Market Positioning - With spreads between Agency MBS and benchmarks reaching near-pandemic highs in early April 2025, AGNC's $77.9 billion Agency MBS portfolio is well-positioned for compelling forward returns, particularly on a leveraged basis, as these securities are backed by Government-Sponsored Enterprises (GSEs) [4] - Despite potential fluctuations in short-term earnings due to market volatility, AGNC's disciplined active management and defensive positioning provide a solid foundation for long-term growth [5] Competitive Landscape - AGNC competes with Annaly Capital Management (NLY) and Starwood Property Trust (STWD) within the mortgage REITs industry, with differing investment approaches among the companies [6] - Annaly pursues a diversified strategy combining traditional Agency MBS with non-agency and credit-sensitive assets, focusing on acquiring newly originated mortgage servicing rights (MSRs) to enhance returns [7] - Starwood focuses primarily on commercial real estate, including commercial mortgage-backed securities (CMBS) and real estate debt investments, maintaining steady income through principal repayments and targeted acquisitions [8] Performance Metrics - AGNC shares have gained 6.4% year to date, outperforming the industry's growth of 2.8% [9] - The company trades at a forward price-to-tangible book ratio of 1.08X, above the industry's average of 0.96X [13] - The Zacks Consensus Estimate for AGNC's 2025 and 2026 earnings implies year-over-year declines of 11.2% and 3.9%, respectively, with estimates remaining unchanged over the past 30 days [15]

Group 1 - The focus is on growth and dividend income as a strategy for retirement planning [1] - The portfolio is structured to generate monthly dividend income that increases through reinvestment and annual raises [1] Group 2 - The article expresses personal opinions and is not intended as investment advice [2][3] - It emphasizes the importance of conducting individual research before making investment decisions [2]

Core Viewpoint - Mortgage REITs offer a double-digit yield, making them appealing to income investors, while the broader REIT sector has faced challenges in recent years [1] Group 1 - Mortgage REITs are traditionally attractive to income investors due to their ability to generate high yields [1] - The REIT sector has been largely inactive in recent years, indicating potential challenges or shifts in market dynamics [1]

Core Insights - After experiencing significant losses in 2022, most mortgage REITs (mREITs) have remained within a trading range over the past two years, with the iShares Mortgage Real Estate Capped ETF (REM) fluctuating between $20 [1] Group 1 - The performance of mortgage REITs has been stable following a tumultuous year in 2022, indicating a potential recovery phase in the sector [1] - The iShares Mortgage Real Estate Capped ETF (REM) has shown a consistent trading range, suggesting limited volatility and investor caution [1]

Core Insights - AGNC Investment Inc. (AGNC) is significantly impacted by mortgage rates, with the average 30-year fixed-rate mortgage decreasing to 6.81% as of June 18, 2025, from 6.84% the previous week and 6.87% a year ago, leading to a net interest income (NII) of $159 million in Q1 2025, a recovery from a $30 million loss in the same period last year [1][9] Group 1: Mortgage Rate Impact - The consistent decline in mortgage rates is enhancing housing affordability, which is expected to boost mortgage originations and refinancing activities, thereby alleviating operational and financial challenges for mREITs like AGNC Investment [2] - AGNC's peers, such as Annaly Capital Management (NLY) and Arbor Realty Trust (ABR), are also affected by mortgage rates, with Annaly showing a strong recovery in NII to $264.6 million from a $6.45 million loss a year ago [3][4] Group 2: Peer Performance - Arbor Realty's NII decreased by 27.2% to $75.4 million in Q1 2025, but the decline in mortgage rates is anticipated to improve net interest spreads, easing earnings pressure due to rising funding costs [5] Group 3: Valuation and Estimates - AGNC shares have declined by 5% over the past year, which is better than the industry's decline of 7.5% [6] - The company trades at a forward P/E ratio of 5.67X, below the industry average of 7.89X, despite a 5.4% stock decline [10][9] - The Zacks Consensus Estimate for AGNC's earnings in 2025 and 2026 indicates a year-over-year decline of 11.2% and 3.9%, respectively, with estimates remaining unchanged over the past 30 days [12]

I analyze securities based on value investing, an owner's mindset, and a long-term horizon. I don't write sell articles as those are considered short theses, and I never recommend shorting.Former advisory representative at Fidelity. I do my own investing now and share my research here.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expres ...

Core Viewpoint - The article highlights three high-yield dividend stocks that offer an average yield of 10.96%, providing investors with a reliable source of monthly income [1]. Group 1: Dividend Stocks Performance - Companies that consistently pay dividends are typically profitable and have a history of outperformance [2]. - A study by Hartford Funds and Ned Davis Research shows that dividend-paying stocks delivered an average annual return of 9.2% over 51 years, compared to 4.31% for non-payers [3]. Group 2: AGNC Investment - AGNC Investment, a mortgage REIT, offers a yield of 15.48% and has provided consistent double-digit yields for over a decade [6]. - The company borrows at low short-term rates to invest in higher-yielding long-term assets, such as mortgage-backed securities [7]. - The recent shift to a rate-easing cycle by the Federal Reserve is favorable for AGNC, as it typically performs well during such periods [9]. - AGNC's portfolio is heavily focused on agency securities, which are backed by the federal government, providing added safety [10]. - The normalization of the U.S. Treasury yield curve is expected to enhance AGNC's net interest margin and book value [11]. Group 3: PennantPark Floating Rate Capital - PennantPark Floating Rate Capital, a business development company, has an annual dividend yield of 11.8% and a market cap of $1 billion [13]. - The company focuses on debt investments, with a weighted average yield of 10.5% on its debt portfolio [15]. - PennantPark's management has implemented a rigorous vetting process, resulting in a low delinquency rate of 2.2% for its loan portfolio [17]. Group 4: Realty Income - Realty Income, a retail REIT, offers a yield of 5.6% and has increased its monthly payout for 111 consecutive quarters [18]. - The company manages a commercial real estate portfolio of over 15,600 properties, generating more than $5 billion in annualized base rent [19]. - Realty Income's tenant base is resilient to economic downturns, with over 90% of rent collected from businesses that provide essential goods and services [20]. - The company boasts a historical median occupancy rate of 98.2%, significantly higher than the S&P 500 REITs' median of 94.2% [21]. - Realty Income is considered relatively undervalued, with a forward-year multiple of 12.8, representing a 21% discount to its average multiple over the past five years [22].

Group 1: Investment Opportunities - Mortgage REITs, preferred shares, baby bonds, and BDCs are highlighted as high-yielding investment alternatives, with preferred shares and baby bonds generally outperforming mortgage REIT common shares over the long term [1] - BDCs have performed well in recent years, benefiting from higher interest rates which increased their income despite also raising their cost of funds [3] - Preferred shares from mortgage REITs have shown stability in dividends and total returns, contrasting with the declining book value of common shares [5][19] Group 2: Performance Analysis - Fixed-rate preferred shares have underperformed due to significant changes in interest rates, while fixed-to-floating shares have performed well with lower price volatility [4] - Baby bonds have shown impressive performance, with many trading above their maturity value of $25.00, indicating solid investor confidence [7] - The worst-performing baby bond, RCD from Ready Capital, is down only about 4% adjusted for dividends, which is considered a relatively minor loss [8] Group 3: Market Expectations - Q2 2025 is anticipated to be a challenging quarter for mortgage REITs regarding total economic return, which includes changes in book value and dividends [9] - The spread between the yield on assets and the cost of funds for mortgage REITs is currently favorable, suggesting potential for earnings on newly invested capital [10][13] Group 4: Long-Term Trends - Preferred shares have outperformed common shares from the same mortgage REITs since early 2022, demonstrating lower volatility and consistent income generation [19][23] - The performance of fixed-rate agency MBS pools indicates a strong interest in preferred shares, with trading values reflecting healthy demand [16] Group 5: Future Opportunities - There are current opportunities in preferred shares and baby bonds, prompting the company to consider reallocating capital into these investments [24] - The demand for key real estate sectors is expected to increase, presenting a prime opportunity for investment in REITs, preferred shares, and BDCs in 2025 [27]

Core Viewpoint - AGNC Investment Inc.'s performance is significantly influenced by mortgage rates, which have recently declined, positively impacting loan demand and operational challenges for mREITs like AGNC [1][2][10] Group 1: Mortgage Rates and Market Conditions - The average rate on a 30-year fixed-rate mortgage was 6.84% as of June 12, 2025, down from 6.95% a year ago, indicating a favorable trend for housing affordability [1] - Lower mortgage rates are expected to increase loan demand, leading to a positive trend in mortgage originations and refinancing [2] - The Federal Reserve's interest rate cuts by 100 basis points in 2024 have stabilized funding costs for AGNC, easing earnings pressure and potentially increasing dividend payouts [3] Group 2: Dividend and Financial Profile - AGNC's current dividend yield is 15.43%, significantly higher than the industry average of 11.68%, attracting investors seeking steady income [4] - The company has a stock repurchase plan authorizing up to $1 billion of common stock through December 31, 2026, enhancing shareholder value [7] - AGNC generated an economic return of 2.4% in Q1 2025, supported by its compelling monthly dividend [11] Group 3: Investment Strategy and Market Position - AGNC focuses on agency mortgage-backed securities (RMBS), positioning itself as a strong player in this specialized market segment [8] - Despite market volatility and increased spreads following the April tariff announcement, the fundamental outlook for agency MBS assets has shown improvement [9][10] - AGNC's shares have gained 8.1% in the past six months, outperforming the industry average of 3.2% [13] Group 4: Valuation and Future Outlook - AGNC is currently trading at a premium valuation with a forward 12-month price-to-tangible book (P/TB) multiple of 1.09X, above the industry average of 0.96X [19][22] - The company is expected to benefit from lower mortgage rates and anticipated interest rate cuts in 2025, which could boost net interest spread and book value [15] - Investors are advised to analyze upcoming interest rate changes and the mortgage market for a more appropriate entry point due to AGNC's premium valuation [23]