AGNC Funding Corp. (Nasdaq: AGNC) is well-liked with revenue traders due to its fats 14.4% dividend yield. The corporate is an actual property funding belief that invests in swimming pools of mortgages which can be backed by government-sponsored organizations like Freddie Mac and Fannie Mae.
I lined the inventory twice in 2024, giving it an “F” ranking each occasions.
In January 2024, I wrote that it had “about as unhealthy a dividend historical past as I’ve seen” and mentioned the dividend was “at nice threat of being minimize.”
Then, in November, I referred to as the dividend “extraordinarily unsafe and a powerful candidate for a minimize.”
On the time, AGNC was coming off of a 12 months with detrimental internet curiosity revenue (NII), the measure of money stream that we use for mortgage REITs. It was anticipated to submit one other detrimental quantity in 2024.
As an alternative, the corporate generated $18 million in constructive internet curiosity revenue. Nonetheless, it paid out $1.2 billion in dividends.
That’s like for those who made $18 and gave your buddy $1,200. You may be a hell of a good friend, however it’s not sensible or sustainable.
This 12 months, internet curiosity revenue needs to be a lot improved at over $600 million, however dividends paid are anticipated to be greater than double that determine at over $1.3 billion.
AGNC has slashed the dividend thrice over the previous 10 years. The final one was in April 2020, proper because the pandemic was kicking in. The $0.12 per share month-to-month payout that was established then has remained the identical since. That monitor file exhibits us that administration is keen to slash the dividend when needed – and it actually appears needed now.
With three current dividend cuts and an anticipated dividend payout that’s nonetheless miles above the quantity of internet curiosity revenue the corporate generates, AGNC’s dividend stays very unsafe.
Dividend Security Ranking: F
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