Comparing Dividends: AGNC vs Realty Income
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 11 hours ago
0mins
Should l Buy AGNC?
Source: Fool
- Dividend Yield Comparison: AGNC Investment offers a high dividend yield of 13.4%, yet its stock price and dividends have been declining for years, potentially leading to capital erosion for dividend-dependent investors and impacting long-term returns.
- REIT Characteristics: AGNC Investment focuses on managing a portfolio of mortgage securities, and while its total return is similar to the S&P 500 index, most income-focused investors are unlikely to reinvest dividends, resulting in diminished actual returns.
- Stability of Realty Income: Realty Income provides a 5.2% dividend yield and has increased its dividends for 31 consecutive years; although the growth rate is modest, it slightly exceeds inflation, making it suitable for investors relying on dividends for daily expenses.
- Investment Strategy Alignment: While AGNC Investment may seem attractive based solely on dividend yield, a deeper analysis reveals that AGNC is better suited for investors seeking total returns, whereas Realty Income is more appropriate for those needing stable cash flow from dividends.
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Analyst Views on AGNC
Wall Street analysts forecast AGNC stock price to rise
10 Analyst Rating
4 Buy
6 Hold
0 Sell
Moderate Buy
Current: 10.720
Low
10.00
Averages
11.71
High
13.00
Current: 10.720
Low
10.00
Averages
11.71
High
13.00
About AGNC
AGNC Investment Corp. is an investor in Agency residential mortgage-backed securities (Agency MBS), which benefit from a guarantee against credit losses by Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), or Government National Mortgage Association (Ginnie Mae). The Company's business is a source of private capital for the United States residential housing market. The Company invests on a leveraged basis, financing its Agency MBS assets primarily through repurchase agreements, and utilizes dynamic risk management strategies intended to protect the value of its portfolio from interest rate and other market risks. The Company may also invest in Agency multifamily MBS that are similarly guaranteed by a United States Government-sponsored enterprise (GSE) and in other assets related to the housing, mortgage or real estate markets that are not guaranteed by a GSE or United States Government agency.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Comparing Dividends: AGNC vs Realty Income
- Dividend Yield Comparison: AGNC Investment offers a high dividend yield of 13.4%, yet its stock price and dividends have been declining for years, potentially leading to capital erosion for dividend-dependent investors and impacting long-term returns.
- REIT Characteristics: AGNC Investment focuses on managing a portfolio of mortgage securities, and while its total return is similar to the S&P 500 index, most income-focused investors are unlikely to reinvest dividends, resulting in diminished actual returns.
- Stability of Realty Income: Realty Income provides a 5.2% dividend yield and has increased its dividends for 31 consecutive years; although the growth rate is modest, it slightly exceeds inflation, making it suitable for investors relying on dividends for daily expenses.
- Investment Strategy Alignment: While AGNC Investment may seem attractive based solely on dividend yield, a deeper analysis reveals that AGNC is better suited for investors seeking total returns, whereas Realty Income is more appropriate for those needing stable cash flow from dividends.
See More
Comparison of AGNC and Realty Income Yields
- Yield Comparison: AGNC Investment boasts a dividend yield of 13.4%, more than double Realty Income's 5.2%, yet a high yield does not necessarily equate to a superior investment choice, highlighting the need for deeper analysis.
- Investment Strategy Differences: AGNC is tailored for investors seeking total returns, while Realty Income is better suited for those relying on dividends for living expenses, with the latter's dividends having increased annually for 31 years, slightly outpacing inflation.
- Market Performance Analysis: Although AGNC's total return has been comparable to the S&P 500 index, the declining trend in both dividends and stock price poses risks for income-focused investors, potentially leading to reduced capital and income.
- Investment Risk Assessment: Realty Income's investment-grade rating and conservative operational history position it as a low-risk dividend stock; despite its lower yield, its stability and long-term growth potential make it an ideal choice for most dividend investors.
See More
Federal Reserve Holds Rates Steady, Banks Show Tepid Response
- Rate Policy Stability: The Federal Reserve decided to keep the federal funds rate in the 3.5% to 3.75% range during its April 29 meeting, with inflation rising due to higher energy costs, and the market does not expect rate cuts this year, resulting in limited impact on bank stocks.
- Tepid Bank Stock Response: Following the Fed's decision, shares of JPMorgan Chase and Bank of America saw slight increases but subsequently dropped, with both down 3% to 4% by May 5, reflecting market concerns over economic outlook.
- Loan Activity and Rates: While higher rates typically benefit banks by allowing them to charge more for loans, they may also suppress loan activity; however, both JPMorgan Chase and Bank of America reported strong loan activity in Q1, achieving higher net interest income despite lower rates compared to last year.
- Active M&A Environment: The first quarter experienced a surge in mergers and acquisitions due to lower interest rates, and while the Fed's decision to maintain rates is unlikely to hinder this activity, both JPMorgan Chase and Bank of America, as top investment banks, benefited from this trend.
See More
Complex Relationship Between Bank Stocks and Interest Rates
- Interest Rates Unchanged: The Federal Reserve's decision on April 29 to maintain the federal funds rate between 3.5% and 3.75% did not significantly alter the stock price trajectories of JPMorgan Chase and Bank of America, both of which saw declines of 3% to 4% in the following days.
- Loan Activity and Revenue: Despite stable rates, both JPMorgan Chase and Bank of America experienced robust loan activity in Q1, leading to increased revenues and net interest income, indicating that banks can still maintain profitability in the current rate environment.
- Impact of M&A Activity: The first quarter saw a notable increase in M&A activity due to the lower interest rate environment, benefiting JPMorgan Chase and Bank of America as top five investment banks, although economic uncertainties and rising inflation have pressured their stock prices.
- Sensitivity of AGNC: As a mortgage real estate investment trust, AGNC is highly sensitive to interest rate fluctuations; while its stock remains relatively stable with unchanged rates, its monthly dividend of $0.12 per share, yielding 13.5%, continues to be attractive in the current environment.
See More
Analysis of High-Yield Stocks: Ares Capital and AGNC Investment
- Attractive Yield: Ares Capital offers a dividend yield of approximately 10%, while AGNC Investment boasts a yield of 13%, making both companies appealing to investors seeking passive income, despite their differing business models.
- Risk Factors: Ares Capital faces risks from loans to software companies, particularly as AI technology threatens traditional business models, resulting in a nearly 20% drop in stock price from its 52-week high, while AGNC is sensitive to interest rate fluctuations, especially between short- and long-term rates.
- Portfolio Composition: Ares Capital's loan portfolio includes 24% in software companies with a loan-to-value ratio of 37%, providing a cushion against significant writedowns, whereas AGNC uses leverage to invest in long-term mortgages to enhance returns.
- Market Outlook: While Ares Capital has historically navigated economic volatility successfully, having weathered multiple crises, AGNC could see improved earnings if short-term rates decline, necessitating careful risk and return assessments from investors.
See More
High-Yield Dividend Stock Analysis: Ares vs. AGNC
- Ares Capital Overview: Ares Capital Corporation, a business development company, focuses on debt and equity investments in middle-market firms, currently offering a 10% dividend yield that reflects the riskiness of its loans, particularly as software companies face disruptions from AI.
- AGNC Investment Model: AGNC Investment operates as a mortgage real estate investment trust, leveraging investments in government-backed mortgage securities, with a 13% dividend yield; however, its business model is highly sensitive to fluctuations in short- and long-term interest rates.
- Market Performance and Risks: Ares Capital's stock has fallen nearly 20% from its 52-week high, with software investments comprising 24% of its loan portfolio, and management employs a dedicated credit investing team to assess technology risks, ensuring stability amid economic volatility.
- Investment Recommendation: While AGNC faces interest rate volatility risks, Ares Capital, with its historical performance across various economic conditions and current trading at a discount to net asset value, emerges as a more reliable high-yield dividend stock for investors seeking stable returns.
See More
Comparing Dividends: AGNC vs Realty Income
- Dividend Yield Comparison: AGNC Investment offers a high dividend yield of 13.4%, yet its stock price and dividends have been declining for years, potentially leading to capital erosion for dividend-dependent investors and impacting long-term returns.
- REIT Characteristics: AGNC Investment focuses on managing a portfolio of mortgage securities, and while its total return is similar to the S&P 500 index, most income-focused investors are unlikely to reinvest dividends, resulting in diminished actual returns.
- Stability of Realty Income: Realty Income provides a 5.2% dividend yield and has increased its dividends for 31 consecutive years; although the growth rate is modest, it slightly exceeds inflation, making it suitable for investors relying on dividends for daily expenses.
- Investment Strategy Alignment: While AGNC Investment may seem attractive based solely on dividend yield, a deeper analysis reveals that AGNC is better suited for investors seeking total returns, whereas Realty Income is more appropriate for those needing stable cash flow from dividends.
See More
Comparison of AGNC and Realty Income Yields
- Yield Comparison: AGNC Investment boasts a dividend yield of 13.4%, more than double Realty Income's 5.2%, yet a high yield does not necessarily equate to a superior investment choice, highlighting the need for deeper analysis.
- Investment Strategy Differences: AGNC is tailored for investors seeking total returns, while Realty Income is better suited for those relying on dividends for living expenses, with the latter's dividends having increased annually for 31 years, slightly outpacing inflation.
- Market Performance Analysis: Although AGNC's total return has been comparable to the S&P 500 index, the declining trend in both dividends and stock price poses risks for income-focused investors, potentially leading to reduced capital and income.
- Investment Risk Assessment: Realty Income's investment-grade rating and conservative operational history position it as a low-risk dividend stock; despite its lower yield, its stability and long-term growth potential make it an ideal choice for most dividend investors.
See More
Federal Reserve Holds Rates Steady, Banks Show Tepid Response
- Rate Policy Stability: The Federal Reserve decided to keep the federal funds rate in the 3.5% to 3.75% range during its April 29 meeting, with inflation rising due to higher energy costs, and the market does not expect rate cuts this year, resulting in limited impact on bank stocks.
- Tepid Bank Stock Response: Following the Fed's decision, shares of JPMorgan Chase and Bank of America saw slight increases but subsequently dropped, with both down 3% to 4% by May 5, reflecting market concerns over economic outlook.
- Loan Activity and Rates: While higher rates typically benefit banks by allowing them to charge more for loans, they may also suppress loan activity; however, both JPMorgan Chase and Bank of America reported strong loan activity in Q1, achieving higher net interest income despite lower rates compared to last year.
- Active M&A Environment: The first quarter experienced a surge in mergers and acquisitions due to lower interest rates, and while the Fed's decision to maintain rates is unlikely to hinder this activity, both JPMorgan Chase and Bank of America, as top investment banks, benefited from this trend.
See More
Complex Relationship Between Bank Stocks and Interest Rates
- Interest Rates Unchanged: The Federal Reserve's decision on April 29 to maintain the federal funds rate between 3.5% and 3.75% did not significantly alter the stock price trajectories of JPMorgan Chase and Bank of America, both of which saw declines of 3% to 4% in the following days.
- Loan Activity and Revenue: Despite stable rates, both JPMorgan Chase and Bank of America experienced robust loan activity in Q1, leading to increased revenues and net interest income, indicating that banks can still maintain profitability in the current rate environment.
- Impact of M&A Activity: The first quarter saw a notable increase in M&A activity due to the lower interest rate environment, benefiting JPMorgan Chase and Bank of America as top five investment banks, although economic uncertainties and rising inflation have pressured their stock prices.
- Sensitivity of AGNC: As a mortgage real estate investment trust, AGNC is highly sensitive to interest rate fluctuations; while its stock remains relatively stable with unchanged rates, its monthly dividend of $0.12 per share, yielding 13.5%, continues to be attractive in the current environment.
See More
Analysis of High-Yield Stocks: Ares Capital and AGNC Investment
- Attractive Yield: Ares Capital offers a dividend yield of approximately 10%, while AGNC Investment boasts a yield of 13%, making both companies appealing to investors seeking passive income, despite their differing business models.
- Risk Factors: Ares Capital faces risks from loans to software companies, particularly as AI technology threatens traditional business models, resulting in a nearly 20% drop in stock price from its 52-week high, while AGNC is sensitive to interest rate fluctuations, especially between short- and long-term rates.
- Portfolio Composition: Ares Capital's loan portfolio includes 24% in software companies with a loan-to-value ratio of 37%, providing a cushion against significant writedowns, whereas AGNC uses leverage to invest in long-term mortgages to enhance returns.
- Market Outlook: While Ares Capital has historically navigated economic volatility successfully, having weathered multiple crises, AGNC could see improved earnings if short-term rates decline, necessitating careful risk and return assessments from investors.
See More
High-Yield Dividend Stock Analysis: Ares vs. AGNC
- Ares Capital Overview: Ares Capital Corporation, a business development company, focuses on debt and equity investments in middle-market firms, currently offering a 10% dividend yield that reflects the riskiness of its loans, particularly as software companies face disruptions from AI.
- AGNC Investment Model: AGNC Investment operates as a mortgage real estate investment trust, leveraging investments in government-backed mortgage securities, with a 13% dividend yield; however, its business model is highly sensitive to fluctuations in short- and long-term interest rates.
- Market Performance and Risks: Ares Capital's stock has fallen nearly 20% from its 52-week high, with software investments comprising 24% of its loan portfolio, and management employs a dedicated credit investing team to assess technology risks, ensuring stability amid economic volatility.
- Investment Recommendation: While AGNC faces interest rate volatility risks, Ares Capital, with its historical performance across various economic conditions and current trading at a discount to net asset value, emerges as a more reliable high-yield dividend stock for investors seeking stable returns.
See More
