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A high yield isn’t the only thing to consider when determining a good income security. Some high-yielding stocks are value traps that lure less sophisticated investors into struggling companies. This explains why it is important to conduct thorough research before choosing a dividend stock.
To help you stay on top of your investing game, we analyzed AGNC Investment Corp. (NASDAQ:AGNC) high yield to determine if it is a good income stock or a potential value trap. AGNC is the second largest mortgage REIT in the world, with a market capitalization of $7.022 billion. The REIT invests in agency-backed residential mortgage-backed securities and states that its objective is to generate superior long-term returns for shareholders with a substantial yield component.
AGNC currently offers an annualized dividend yield of 14.91%, more than 10 times the S&P 500 dividend yield of 1.47%. To determine whether this yield is sustainable, we looked at the REIT’s dividend payment history and fundamentals. AGNC has a shaky dividend history, with rapid ups and downs over the past 10 years.
Additionally, its stock has demonstrated significant volatility, experiencing a 50% decline over the past 5 years. This decline is a key factor in maintaining its high yield, despite the decline in dividends. AGNC’s book value per share has also seen a significant decline, from $23.93 in 2013 to just $8.84 per share at the end of the first quarter of 2024. This decline in book value is a clear indication of a weakened financial situation and an inability to maintain its dividend payments. , highlighting the potential risks of high-yielding stocks.
Even though AGNC may show signs of recovery as interest rates fall, it still has a long way to go to support its high-yielding dividends. Its volatility further highlights the need for caution, making it less favorable for income investments.
There are better high yield opportunities
The current high interest rate environment has created an incredible opportunity for income-seeking investors to achieve massive returns, but not through dividend stocks… Some private market real estate investments give retail investors the opportunity to capitalize on these high yield markets. opportunities and Benzinga identified some of the most attractive options to consider.
For example, the investment platform backed by Jeff Bezos has just launched its Private Debt Fund, which provides access to a pool of short-term loans backed by residential real estate with a net annual return target of 7% to 9% paid monthly to investors. The best part? Unlike other private credit funds, this one has a minimum investment of just $100.
Don’t miss this opportunity to take advantage of high yield investments while rates are high. Check out Benzinga’s favorite high-yield deals.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
This item Is AGNC Investment Corp’s 14.9% Dividend a Yield Trap? originally appeared on Benzinga.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
