Is AGNC Investment Stock a Buy?
If you like ultra-high-yield stocks, then AGNC Investment (NASDAQ: AGNC) and its over 14% dividend yield will probably be on your radar screen. However, when yields get this high you need to step back and make sure you really understand the story behind the company before you buy it. AGNC's story isn't all bad, but it probably isn't the right tale for investors trying to live off of their dividends. Here's what you need to know.
Real estate is in the name real estate investment trust (REIT), a special type of corporate structure that lets companies pass income on to investors without paying corporate taxes. The intent of the REIT structure is to give small investors the chance to buy into institutional level properties. All in, REITs often are a great option for dividend focused investors.
However, not all REITs are equal. That is particularly true when you bring in a REIT like AGNC Investment. It buys mortgages that have been pooled into bond-like securities, often called something like a collateralized mortgage obligation (CMO). That's not the same thing as buying a physical property, even though AGNC is offering access to institutional-level real estate investments (the CMOs it buys). Mortgage REITs are more like mutual funds than operating companies.
Source Fool.com
