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AGNC Investment Trading Above 50-Day SMA: Good Time to Buy?
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AGNC Investment Corp. (AGNC - Free Report) is currently trading above its 50-day simple moving average (SMA). The stock is trading at $9.48, above the 50-day SMA of $9.40, representing an uptrend. A Simple Moving Average is a widely-used technical analysis tool to predict future price trends by analyzing historical price data.
Image Source: Zacks Investment Research
AGNC has a market capitalization of $6.98 billion. The stock has dropped 1.3% compared with the industry’s 0.5% fall in the past month. The S&P 500 has gained 3.6% in the same time frame. Currently, the stock is down 10.9% from its 52-week high of $10.74.
This publicly traded mortgage real estate investment trust (mREIT) offers a lucrative dividend yield of around 15%. Although the yield may be tempting, AGNC’s stagnant dividend and declining share price look foggy.
NLY has an annual dividend yield of 13.64%, while EARN has a dividend yield of 13.81%.
AGNC Investment: High-Income REIT Stock
AGNC Investment primarily focuses on leveraged investments in Agency residential mortgage-backed securities (RMBS). That includes residential mortgage pass-through securities and collateralized mortgage obligations. Notably, a U.S. Government agency or a U.S. Government-sponsored enterprise (GSE) guarantees the principal and interest payments for such investments.
AGNC Investment borrows against its investment portfolio under a master repurchase agreement, which provides short-term financing. The company expects to make a profit and pay the dividend from the net interest income (NII), which is the difference between interest earned on investments and its cost of borrowing.
Income-seeking investors have a large appetite for REIT stocks, as U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends. As for AGNC, the company has a record of paying monthly dividends.
AGNC’s current dividend yield is 15.09%. This is impressive compared with the industry’s average of 11.7% and attracts investors as it represents a steady income stream.
Dividends aside, AGNC has a share repurchase plan in place. In 2022 and 2021, AGNC Investment repurchased 4.7 million shares and 17.7 million shares for $51 million and $281 million, respectively. With no repurchases done in 2023 and first-quarter 2024, $1 billion remained under this program for repurchase through Dec 31, 2024. It plans to buy back shares only when the repurchase price is lower than the then-current estimate of tangible net book value per common share. The buyback program will enable it to respond to the volatility in its stock and boost shareholders’ wealth.
Attractive Dividend: It’s not all Blue Skies
The ultra-high dividend yield and regular payout look eye-catching for most investors watching for high-income funds. However, in April 2020, AGNC slashed its dividend to 12 cents per share from 16 cents and continued to pay the same amount in later periods. Also, the company has a history of cutting its dividend.
AGNC uses leverage to scoop returns and give dividends to investors, which act as an advantage and a disadvantage for the company, depending on the market scenario. Increasing interest rates may have two drawbacks. As a leveraged corporation, the company finds it challenging to hedge its portfolio due to unstable and fluctuating interest rates. Also, high rates enable it to enhance its portfolio yield by investing in mortgages with higher interest rates.
The Federal Reserve has kept its key interest rate unchanged and scaled back its forecast from three rate cuts to just one this year after an inflation pickup in early 2024. This might not serve as a good indicator for AGNC.
Further, any volatility in the mortgage market, unfavorable change in the shape of the yield curve, interest-rate volatility and deterioration of the generic financial conditions may affect the performance of the company's investments. In the past two years, there has been significant volatility in the financial markets. The increase in interest rates resulted in higher debt servicing costs and underperformance of fixed-income assets. Amid these challenges, AGNC Investment’s tangible net book value per common share declined. As of Mar 31, 2024, AGNC has a $8.84 tangible net book value per common share representing a decline of 6.1% from $9.41 at the end of Mar 31, 2023.
2024 Estimates Signals Mixed Result
With ongoing volatility in the market, AGNC stock is expected to deliver a mixed result in the upcoming period.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
Final Thoughts
Although AGNC has a high dividend yield and provides a regular income option, investors might not be able to rely on it over time. The company has a track record of lowering dividends during stressful times. Moreover, ongoing volatility in the interest rate makes investment decisions shaky.
Considering the pros and cons of AGNC, we can conclude that investors should refrain from rushing to buy AGNC now, just banking on its lucrative dividend. Instead, they should analyze the upcoming interest rate changes and market volatility closely for a more appropriate entry point. The stock’s Zacks Rank #3 (Hold) supports our thesis.
Image: Bigstock
AGNC Investment Trading Above 50-Day SMA: Good Time to Buy?
AGNC Investment Corp. (AGNC - Free Report) is currently trading above its 50-day simple moving average (SMA). The stock is trading at $9.48, above the 50-day SMA of $9.40, representing an uptrend. A Simple Moving Average is a widely-used technical analysis tool to predict future price trends by analyzing historical price data.
AGNC has a market capitalization of $6.98 billion. The stock has dropped 1.3% compared with the industry’s 0.5% fall in the past month. The S&P 500 has gained 3.6% in the same time frame. Currently, the stock is down 10.9% from its 52-week high of $10.74.
This publicly traded mortgage real estate investment trust (mREIT) offers a lucrative dividend yield of around 15%. Although the yield may be tempting, AGNC’s stagnant dividend and declining share price look foggy.
AGNC is not the only dividend-paying stock among Zacks Industry – REIT and Equity Trust. Stocks like Annaly Capital Management (NLY - Free Report) and Ellington Credit Company (EARN - Free Report) are also providing investors with solid dividend options.
NLY has an annual dividend yield of 13.64%, while EARN has a dividend yield of 13.81%.
AGNC Investment: High-Income REIT Stock
AGNC Investment primarily focuses on leveraged investments in Agency residential mortgage-backed securities (RMBS). That includes residential mortgage pass-through securities and collateralized mortgage obligations. Notably, a U.S. Government agency or a U.S. Government-sponsored enterprise (GSE) guarantees the principal and interest payments for such investments.
AGNC Investment borrows against its investment portfolio under a master repurchase agreement, which provides short-term financing. The company expects to make a profit and pay the dividend from the net interest income (NII), which is the difference between interest earned on investments and its cost of borrowing.
Income-seeking investors have a large appetite for REIT stocks, as U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends. As for AGNC, the company has a record of paying monthly dividends.
AGNC’s current dividend yield is 15.09%. This is impressive compared with the industry’s average of 11.7% and attracts investors as it represents a steady income stream.
Dividends aside, AGNC has a share repurchase plan in place. In 2022 and 2021, AGNC Investment repurchased 4.7 million shares and 17.7 million shares for $51 million and $281 million, respectively. With no repurchases done in 2023 and first-quarter 2024, $1 billion remained under this program for repurchase through Dec 31, 2024. It plans to buy back shares only when the repurchase price is lower than the then-current estimate of tangible net book value per common share. The buyback program will enable it to respond to the volatility in its stock and boost shareholders’ wealth.
Attractive Dividend: It’s not all Blue Skies
The ultra-high dividend yield and regular payout look eye-catching for most investors watching for high-income funds. However, in April 2020, AGNC slashed its dividend to 12 cents per share from 16 cents and continued to pay the same amount in later periods. Also, the company has a history of cutting its dividend.
AGNC uses leverage to scoop returns and give dividends to investors, which act as an advantage and a disadvantage for the company, depending on the market scenario. Increasing interest rates may have two drawbacks. As a leveraged corporation, the company finds it challenging to hedge its portfolio due to unstable and fluctuating interest rates. Also, high rates enable it to enhance its portfolio yield by investing in mortgages with higher interest rates.
The Federal Reserve has kept its key interest rate unchanged and scaled back its forecast from three rate cuts to just one this year after an inflation pickup in early 2024. This might not serve as a good indicator for AGNC.
Further, any volatility in the mortgage market, unfavorable change in the shape of the yield curve, interest-rate volatility and deterioration of the generic financial conditions may affect the performance of the company's investments. In the past two years, there has been significant volatility in the financial markets. The increase in interest rates resulted in higher debt servicing costs and underperformance of fixed-income assets. Amid these challenges, AGNC Investment’s tangible net book value per common share declined. As of Mar 31, 2024, AGNC has a $8.84 tangible net book value per common share representing a decline of 6.1% from $9.41 at the end of Mar 31, 2023.
2024 Estimates Signals Mixed Result
With ongoing volatility in the market, AGNC stock is expected to deliver a mixed result in the upcoming period.
Final Thoughts
Although AGNC has a high dividend yield and provides a regular income option, investors might not be able to rely on it over time. The company has a track record of lowering dividends during stressful times. Moreover, ongoing volatility in the interest rate makes investment decisions shaky.
Considering the pros and cons of AGNC, we can conclude that investors should refrain from rushing to buy AGNC now, just banking on its lucrative dividend. Instead, they should analyze the upcoming interest rate changes and market volatility closely for a more appropriate entry point. The stock’s Zacks Rank #3 (Hold) supports our thesis.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.