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AGNC: Turning A Low-Yielding, Low-Risk Asset Into A 12% Yield

Published Wed, 02 Oct 2019 08:35:00 -0400 on Seeking Alpha

Co-produced with Beyond Saving and Treading Softly
At High Dividend Opportunities, we emphasize finding investments that are paying a higher than average dividend yield. This frequently means that we find ourselves investing in "contrarian" picks, in sectors that have been beaten down by the market for one reason or another.
One such sector is Agency Mortgage REITs - mREITs that primarily invest in agency mortgage-backed securities. Once touted as the "creme de la creme" of mREITs, today these companies find themselves trading at multi-decade lows.
Years of declining core earnings and declining dividends have inspired negative articles and filled comment threads with comments pointing out lackluster performance over the past 5-10 years. They have been labeled as "risky" despite investing in some of the lowest risk assets in the world, not appropriate for retirement portfolios, and by the more extreme comments as "Ponzi schemes".
It is clear that many fail to understand how agency mREITs work. We have taken advantage of this by initiating a position in the 11.5% yielding Annaly Capital (NLY) in June, observing that agency mREITs excel leading up to and during a recession. Today, we are adding a company with a very similar strategy, AGNC Investment Corp (AGNC).
The primary reason we chose to invest in NLY first, was that at the time, NLY was trading at a larger discount. Since June, AGNC has come down and is now in our buy range.
Agency MBS 101
Given the... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
ANNALY CAPITAL MANAGEMENT 8.60   0.0 -3.32 1.20 14.00


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