Before You Buy AGNC Investment, Here's a REIT I'd Buy First
The big draw for AGNC Investment (NASDAQ: AGNC) is its 15% dividend yield. But you have to step back and understand why that yield is so high. When you do that, you'll realize that the lower 6% yield from fellow real estate investment trust (REIT) Realty Income (NYSE: O) is likely to be a better choice for most dividend-focused investors.
REITs were designed to pass income from institutional-level real estate investments on to everyday investors. The basic concept is sound since small investors wouldn't be able to buy a diversified portfolio of large properties. But all REITs are not created to own the same things. For example, some buy offices and others apartments. But there's another sub-sector that really flips the script: mortgage REITs.
A mortgage REIT like AGNC doesn't buy property at all. It buys mortgages that have been pooled together into bonds, often referred to as collateralized mortgage obligations (CMOs) or something similar. These are institutional-level investments, but they are very different from an investment in a physical building.
Source Fool.com
