AGNC Investment Stock: Buy, Sell, or Hold?

Core Viewpoint - AGNC Investment is a contentious investment for dividend investors, offering a high forward yield of 15% but facing criticism for poor performance and potential risks associated with high yields [1] Group 1: Business Model - AGNC operates as a mortgage REIT (mREIT), generating income by offering mortgages or purchasing mortgage-backed securities (MBSes) rather than owning physical properties [2] - mREITs are required to distribute at least 90% of their taxable earnings as dividends to maintain favorable tax treatment, exposing them to various risks including interest rate, prepayment, credit, and rollover risks [3] Group 2: Risks and Volatility - Low interest rates can reduce interest income for mREITs, while high rates can diminish demand for new mortgages, impacting growth [4] - mREITs are generally riskier and more volatile than traditional REITs, but they offer higher yields due to the increased risks taken [5] Group 3: Reasons to Buy or Hold - AGNC allocates over 98% of its portfolio to agency MBS assets backed by government-sponsored enterprises, which mitigates credit risk [6][7] - The company has a captive broker-dealer arrangement that allows access to lower funding rates and collateral requirements, and it pays monthly dividends with a payout ratio below 100% [8] Group 4: Reasons to Sell or Avoid - Despite high dividends, AGNC has underperformed the market, with a 58% decline in stock price over the past decade and a 25% dividend cut during the pandemic [9][10] - Total returns for AGNC, including reinvested dividends, were only 38% over ten years, significantly lagging behind the S&P 500's 245% return [10][11] Group 5: Investment Recommendation - While AGNC appears cheap and offers a high yield, its exposure to credit and interest rate risks makes it less attractive compared to other REITs, leading to a recommendation to sell or avoid this stock [12]