9.25% Yield, Not Excited: Time To Talk About AGNC Preferreds

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]