Investment

Is AGNC Investment Stock a Buy?

Published

4 months ago

June 30, 2024

The answer is a clear no for most investors, but not for all investors. Here’s why you might want to own this ultra-high-yield REIT.

If there’s one thing you need to know about AGNC Investment (AGNC 0.21%), it is that this mortgage real estate investment trust (REIT) has an ultra-high dividend yield of 15%. This is both a blessing and curse for investors, but which one it is depends a lot on the type of investor you happen to be. Here’s why most investors will not want to buy AGNC Investment and why some will actually find the high-yield stock quite interesting.

Who should NOT buy AGNC Investment

A 15% dividend yield is eye-catching for most dividend investors. Think about that for just a second — the rule of thumb average return for stocks is generally considered 10%. Just the dividend from AGNC Investment gets you above that figure. That sounds too good to be true, and for anyone that needs to use dividends to pay for their everyday expenses, well, it is too good to be true. Just look at the chart below and you’ll quickly see why.

AGNC Dividend Per Share (Quarterly) data by YCharts

The quarterly dividend payment, which is the purple line, is the important one for dividend-focused investors. It went up rapidly after AGNC Investment went public, but has been trending lower for more than a decade. Most investors would probably prefer a growing dividend stream, not one that has been shrinking. Now look at the orange line, which is dividend yield. It has been high throughout the REIT’s history, often more than 10%. A high-yield stock that cuts its dividend regularly is pretty much the epitome of a dividend trap.

For reference, the math behind dividend yields dictates that the price has to be falling along with the dividend to keep the yield high (more on the stock price below). So not only did investors end up with less income, they also ended up with less capital, too. You can see why most investors, particularly those in search of passive income, will probably want to avoid this ultra-high-yield REIT.

Some investors will find AGNC Investment appealing

But just because a stock is a bad choice for most investors doesn’t mean that it won’t be a good fit for a select few. And that’s the situation with AGNC Investment. Another chart will help to show why. As you would expect from the way yields are calculated, AGNC Investment’s stock price has fallen as the dividend has been cut. Since inception the stock has lost around half of its value, as the purple line below shows.

AGNC data by YCharts

However, look at the orange line, which is the total return. It is up more than 385%! The key here is that total return requires that dividends get reinvested. Essentially, the huge yield lets investors keep buying the shares and is leading to compounding that more than makes up for the stock price decline. But you have to reinvest the dividend to achieve this result. Put another way, AGNC Investment is not really an income stock; it should be looked at as a total return vehicle.

What AGNC Investment ends up being is an attractive way to gain exposure to the mortgage market. In fact, since its initial public offering, AGNC Investment’s total return is nearly as high as the total return of the S&P 500 index. That’s something that will interest investors that use an asset allocation model. This isn’t the approach that most small investors take, but it is a common approach for large investors like pension funds, family offices, and insurance companies.

Bad for some, good for others

AGNC Investment is not a bad company, and it is not a bad stock. It has a very specific purpose — providing exposure to the mortgage market — and it does that fairly well. That purpose, however, won’t meet the needs of every investor. If you need to use the income your portfolio generates, history suggests that you won’t want to own AGNC Investment. But if you look at total return and want exposure to mortgage securities, perhaps to fill out your asset allocation model, AGNC Investment could be just the stock for you.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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