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AGNC: I Keep Buying This 10% Yield

Published Wed, 14 Oct 2020 09:05:07 -0400 on Seeking Alpha

Seeking AlphaDividend Ideas | Financials AGNC: I Keep Buying This 10% YieldOct. 14, 2020 9:05 AM ET|| About: AGNC Investment Corp. (AGNC), Includes: AGNCM, AGNCN, AGNCO, AGNCP, ARR, CHMI, DX, MFA, MITT, NLY, NLY.PD, NLY.PF, NLY.PG, NLY.PI, ORC, TWOby: Rida MorwaRida Morwa High Dividend OpportunitiesThe #1 Service for Income Investors and Retirees, 9-10% dividend yield.SummaryAgency MBS is an investment that has its best returns when short-term rates are very low.
The Federal Reserve has made it clear that they intend to keep rates low for several years.
After a decade of being squeezed by declining spreads, AGNC has finally seen their net interest spread return to 2014 levels and climbing.
The market is still pricing AGNC at a discount to book. We expect that is going to change after a strong earnings report.


Co-produced with Beyond Saving
Agency mortgage REITs are perhaps the best deal in the market right now. Two months ago, we highlighted AGNC Investment Corp. (AGNC).
While AGNC has outperformed the market since then, the price increases have failed to keep pace with their book value growth. AGNC reported that their tangible net book value grew 6.1% in August to $15.74, their share price is up less than 3%. The stock is trading at a greater than 10% discount to tangible book value.
The stars have aligned for agency MBS (Mortgage-Backed-Securities). Their cost to borrow is incredibly low thanks to the Federal Reserve's target rate being set at 0-0.25%. The Federal Reserve has been a major buyer of MBS, uplifting and providing stability to MBS prices. US Treasuries have been trading in an incredibly narrow range. Finally, the Federal Reserve has stated they intend to keep rates low for at least several years.
All of this adds up to an environment where the agency MBS trade should outperform. Despite these ideal conditions, AGNC, along with other agency mREITs, is trading at a discount to book value. We are very happy to be buying up... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
ORCHID ISLAND CAPITAL 5.58   0.0 -0.29 0.96 17.75
CHERRY HILL MORTGAGE INVESTMENT 13.52   0.0 -3.91 1.60 14.40
ANNALY CAPITAL MANAGEMENT 8.60   0.0 -3.32 1.20 14.00
DYNEX CAPITAL 15.16   0.0 -10.26 1.80 12.06
ARMOUR RESIDENTIAL REIT 17.26   0.0 -9.30 2.04 12.03
TWO HARBORS INVESTMENT 13.28   0.0 -2.81 1.60 12.02
AG MORTGAGE INVESTMENT TRUST 17.47   6.1 2.87 1.90 10.89
MFA FINANCIAL 7.39   10.4 0.71 0.80 10.81