Better Buy: AGNC Investment or Realty Income?

Investors trying to maximize the income their portfolios generate often get lured in by the prospect of giant yields. That makes sense, since a higher yield will mean higher income -- at least in the near term. The problem is that some high-yielding payouts just can't be relied upon to continue. That's why investors looking at mortgage real estate investment trust (REIT) AGNC Investment's (NASDAQ: AGNC) huge 14% yield might be better off with the relatively modest 5% yield of standard REIT Realty Income (NYSE: O).

There's no question that an investment in AGNC today will produce more dividend income in the short run than the same investment in Realty income. The dividends you would collect would be substantially higher, given the difference in their yields. But here's the rub: Over the past decade, AGNC's actual payouts have been heading steadily lower while Realty income's payouts have been heading steadily higher.