Before You Buy AGNC, Here's a More Reliable Dividend Stock I'd Buy First

Income investors pay a lot of attention to dividend yield, which makes a fair amount of sense. However, very often, the stocks with the highest yields aren't the best investment choices. That disparity has been on clear display with AGNC Investment (NASDAQ: AGNC). If you need reliable dividends to help you pay for living expenses, a lower-yielding but steadier dividend payer like Federal Realty (NYSE: FRT) will likely be a better choice.

Since real estate investment trusts (REITs) such as AGNC and Federal Realty must by law pass on to shareholders almost all their taxable income, the perfect place to start a discussion about their investment theses is with their dividends. At its current share price, AGNC has a towering 15% dividend yield. That's a figure that would catch the eye of almost any investor, but considering how much higher it is than the average for the broader market (an S&P 500 index ETF only yields about 1.7% now), it should probably make you question what's going on. If that isn't the first question on your mind when you see a yield that high, you might end up buying a yield trap.