Is AGNC Investment Stock a Buy Now?

Although I'm not retired yet, I'm trying to build a portfolio of reliable dividend stocks that I can count on to provide income when I do stop working. I have little to no interest in buying AGNC Investment (NASDAQ: AGNC) for my portfolio and its monster yield of almost 15%. But that doesn't mean it's a bad investment. There's an important nuance when it comes to this ultra-high-yield mortgage real estate investment trust (REIT) that you'll want to understand before you consider buying it.

AGNC Investment doesn't solve my problem

My long-term goal is to create an income stream to supplement Social Security when I retire. I don't have a pension, so it is up to me to save and invest for myself. I own a number of REITs, specifically because they produce solid income streams. My core holdings include Realty Income (NYSE: O), W.P. Carey (NYSE: WPC), Simon Property Group (NYSE: SPG), and Federal Realty (NYSE: FRT). I also own one tiny REIT called Alpine Income Property Trust (NYSE: PINE), which I believe is being mispriced by the market. However, I classify Alpine as a higher-risk investment, and it doesn't hold the same foundational place in my portfolio as the other REITs.

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To be fair, W.P. Carey recently cut its dividend after shedding the office holdings from from its diversified portfolio. Mall landlord Simon tends to cut its dividend during recessions. However, both have quickly returned to dividend growth after cuts. Realty Income, Federal Realty (which is the only REIT that is a Dividend King), and Alpine (to a lesser degree, since it's a relatively young company) all have dividend growth streaks going. I'm not just looking for big income streams, but reliable ones. Simon is the least reliable, but since it quickly increased the divided to, and even beyond, pre-cut levels after each reduction, I'm OK with owning it.

AGNC Investment's dividend payment has been falling for more than a decade. Worse, the stock price has followed the dividend lower. So, if I were retired and trying to live off the income generated from AGNC Investment, I would have been left with less income and less capital. That's a terrible outcome for anyone who's looking to do the same thing I am.

AGNC data by YCharts.

AGNC Investment is a total return story

What's interesting with AGNC Investment is that I would have a strong total return if I had owned it because I reinvest my dividends for now. This is actually the entire purpose of AGNC Investment, which the company clearly states. According to the investor website, the objective of the REIT is "Favorable long-term stockholder returns with a substantial yield component."

Management has lived up to that goal, as the chart below highlights. The key is that AGNC Investment has paid out more in dividends since its initial public offering than it has lost in share price. So reinvesting the dividend has resulted in material growth in the value of the investment over time. That's great, and AGNC Investment deserves credit for it.

AGNC data by YCharts.

But it isn't aligned with my goal of creating a reliable income stream when I retire. Investors looking to add mortgage exposure to an asset allocation model, however, would probably find it quite attractive. Unlike the REITs I hold, which own physical properties and rent them to tenants, AGNC Investment owns mortgages that have been pooled into bond-like securities.

AGNC Investment is more complex than property-owning REITs in a lot of ways. But, as noted, it does a good job of rewarding investors with regard to total return. And total return is really all that an asset allocator is usually concerned with. That said, asset allocation is usually the purview of larger institutional investors, like endowments and insurance companies.

Is AGNC Investment a buy?

AGNC Investment is not now, and likely never will be, a REIT that I would buy. Its goals are simply different from what I am attempting to achieve. However, the REIT has successfully achieved its total return goals, which may make it a buy for some investors. If you're an income investor like me, you need to tread carefully here, or you could find you've bought an investment that will leave you with less income to spend and less capital to invest, despite its huge dividend yield.

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Reuben Gregg Brewer has positions in Alpine Income Property Trust, Federal Realty Investment Trust, Realty Income, Simon Property Group, and W.P. Carey. The Motley Fool has positions in and recommends Realty Income and Simon Property Group. The Motley Fool has a disclosure policy.