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AGNC (NASDAQ: AGNC), one of the largest mortgage real estate investment trusts (mREITs) in the U.S., turns heads with its 16.6% forward dividend yield. But its stock has also declined 13% over the past 12 months, offsetting most of those dividends, and sits near its 52-week low.
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As an mREIT, AGNC invests in mortgages and mortgage-backed securities (MBS) to collect interest. Like equity REITs, it pays out at least 90% of its taxable income as dividends to maintain a lower tax rate.
To shield itself from another credit crunch, AGNC allocates 89% of its $97.2 billion portfolio to Agency MBS backed by Fannie Mae, Freddie Mac, or Ginnie Mae. But it's still sensitive to interest rate swings because it takes out short-term loans at lower rates to fund its long-term MBS purchases. If the Fed continues to raise its benchmark rates, the net interest spread (which currently hovers nearly 2%) will narrow, reducing its profits.
For 2026, analysts expect its EPS to grow 5% to $1.58 per share and cover its forward dividend rate of $1.44 per share ($0.12 monthly). But in 2027, they expect its EPS to dip 6% to $1.49 as higher rates reduce its net interest income. That pressure could drive investors away from AGNC for the foreseeable future, so it's smarter to sell or avoid it than to buy and hold it today.
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Leo Sun 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.
Is AGNC Stock a Buy, Sell, or Hold Near Its 52-Week Low? was originally published by The Motley Fool
