AGNC Stock: Can This Company Finally Sustain Its Double-Digit Yield?

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AGNC Investment Corp. (Nasdaq: AGNC) is one of the most requested stocks in the Safety Net column because of its high yield. Today, the mortgage broker yields 14%, so you can understand why it’s so popular.

But does it deserve its adulation from the income investing crowd?

More importantly, can those investors rely on that juicy 14% yield?

When I last looked at AGNC’s dividend safety in January, the company had not yet reported fourth quarter 2022 results. At that time, net interest income (NII) was forecast to be $1.5 billion for 2022, falling to $1.3 billion in 2023.

AGNC didn’t come close to hitting last year’s projection.

NII totaled $965 million, down from $1.29 billion the year before. The good news is that NII is now expected to rise to $1.37 billion this year.

There’s more good news. AGNC paid shareholders $869 million in dividends, or 90% of NII.

For a mortgage real estate investment trust, anything below 100% is solid. This year’s estimated $894 million in dividends will be just 65% of the projected $1.37 billion in NII – an even better margin.

So the dividend looks fine if AGNC comes anywhere close to the estimates.

However, AGNC has a horrid track record when it comes to its dividend.

Chart: AGNC Annual Dividend per Share

You can see how often the company has cut the dividend in the past 12 years. The dividend has fallen all the way from $5.60 to $1.44 annually.

In January, the stock’s dividend safety rating was an “F.” With this dividend-cutting track record and the fact that the company’s NII fell sharply last year, the rating hasn’t improved…

Right now, the payout ratio is low, which is positive. But the company clearly isn’t afraid to slash the dividend when the going gets tough.

There’s a saying that goes, “When a person shows you who they are, believe them.

The same goes for dividend payers.

When a company shows you it is a serial dividend cutter, believe it.

Dividend Safety Rating: F

Dividend Grade Guide

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