Is It Too Late to Buy AGNC Investment Stock?
AGNC Investment (NASDAQ: AGNC) is not an easy stock to understand. It's often viewed as an income investment because of its huge 14%-plus dividend yield. Only dividend investors have been let down by the company's long string of dividend cuts. You need to take a different view of AGNC if you want to buy it. Here's what you need to know about this niche real estate investment trust (REIT) and why it isn't too late to buy it, but only if you know what you're buying.
Most real estate investment trusts are fairly simple to understand. They buy properties and lease them out to tenants, which is basically what you would do if you bought a rental property. Mortgage REITs like AGNC, however, don't buy properties. They buy mortgages that have been pooled into bond-like securities. That's nothing like what a landlord does. It's more like managing a bond mutual fund.
The mortgage securities AGNC buys are complex. For starters, they trade all day long, so their prices change rapidly. Buildings tend to trade infrequently. Mortgage security prices, meanwhile, can be affected by investor sentiment, interest rates, housing market dynamics, and repayment rates, among other things. On top of that, REITs like AGNC tend to use leverage to enhance their returns, often backed by the value of their loan portfolio. Mortgage REITs are high risk, particularly if you're trying to live off the income your portfolio generates.
Source Fool.com
