AGNC Investment raised $509 million in the first quarter of 2025.
The mortgage REIT sold 49.7 million shares to raise capital, leading to a sales price of around $10.24 per share.
The stock is currently trading a touch below $9 per share and yielding over 16%.
AGNC Investment(NASDAQ: AGNC) is a difficult dividend stock to understand. On the one hand, it offers a gigantic 16% dividend yield. On the other hand, it has a long history of dividend cuts behind it. It isn’t a bad mortgage real estate investment trust (REIT), but dividend investors need to be very careful if they buy this stock, and the $10 price point is an interesting one to consider following first-quarter results.
Technically, the story should be about a stock price of $10.24. That number is derived from the $509 million in capital AGNC Investment raised from the sale of 49.7 million shares of stock in the first quarter of 2025. Divide the cash raised by the number of shares sold, and you come out with $10.24 per share.
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In a vacuum, this number doesn’t mean very much. It starts to become material when you consider the value of AGNC Investment. It is a mortgage REIT that buys bond-like securities that are created by pooling individual mortgages together. So the value of the company is basically the value of the mortgage bonds it owns, which the company reports at the end of every quarter. At the end of 2024, the company’s tangible net book value was $8.41 per share. By the end of the first quarter that was down to $8.25 per share.
But the tangible net book value isn’t the price of the stock, which is currently hovering around $8.95 per share. Here’s the kicker — the stock was trading for over $10 per share as recently as February. It is now 15% below its 2025 high-water mark, which is actually an improvement given that the shares were off by more than 20% at one point in mid-April.
To be fair, interest rate concerns and housing market upheaval can play havoc with AGNC Investment’s business. So it isn’t shocking that investors dumped the stock as uncertainty has risen across the economy. It is also positive for existing shareholders when the REIT sells shares for more than its tangible net book value. But investors buying at the inflated prices are essentially giving their money to existing shareholders and getting little to nothing in return. The stock price drop in 2025 is just a real-world example of what that looks like when times get tough.
Most investors would be better off buying AGNC Investment not below $10, but below its tangible net book value. At the very least, investors shouldn’t pay much more than tangible net book value. After all, the REIT is essentially telling you what each of its shares is worth. And since the stock is still notably above tangible net book value, most investors will probably be better off not buying AGNC Investment today. That said, what about the huge dividend yield that is likely to be very enticing to income investors?
Notice in the chart above that the dividend and stock price have both trended lower for years. If you spend the dividends you generate from your portfolio to support yourself in retirement, AGNC Investment will not be a good investment at any price given its dividend and price history. The only way this investment worked out well for investors historically is if they reinvested dividends, which essentially means focusing on total return and not dividends. Yes, the dividend is a big part of the story, but this isn’t an income stock. It is a total return investment.
The big picture here is that no matter what price you pay for AGNC Investment, it likely will end up being a bad choice if you are expecting a reliable income stream. The history here speaks volumes on that score. But if you are looking to buy it, you need to be careful what you pay. Management is happy to sell more shares when the price is well above tangible net book value, but you should focus on trying to buy it at a price point that is much closer to tangible book value. And that is well below $10 per share today.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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