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Should You Buy AGNC Investment While It's Below $10?
AGNCAGNC(AGNC) The Motley Fool·2024-12-15 10:20

Core Viewpoint - AGNC Investment offers a high forward yield of 15% and pays a consistent monthly dividend of 0.12sinceApril2020,attractingincome−orientedinvestors[1][2][18]CompanyOverview−AGNCisamortgageREITthatinvestsinmortgage−backedsecurities(MBS)backedbygovernmentagencies,whicheliminatesdefaultrisk[5]−Thecompanygeneratesincomebyfinancingshort−termandinvestinginlonger−datedMBS,profitingfromtheinterestratespread[6]RecentPerformance−AGNC′sstockpricehasdeclinedapproximately440.12 since April 2020, attracting income-oriented investors [1][2][18] Company Overview - AGNC is a mortgage REIT that invests in mortgage-backed securities (MBS) backed by government agencies, which eliminates default risk [5] - The company generates income by financing short-term and investing in longer-dated MBS, profiting from the interest rate spread [6] Recent Performance - AGNC's stock price has declined approximately 44% over the past five years, resulting in a total return of about 3% when including dividends [2] - The tangible book value (TBV) per share has decreased by 45% from 15.75 at the end of 2021 to 8.70attheendof2023,stabilizingat8.70 at the end of 2023, stabilizing at 8.82 in Q3 2024 [12] Market Conditions - The mortgage REIT sector has faced challenges due to an inverted yield curve and rising interest rates, impacting the value of MBS [8][10] - Recent Federal Reserve rate cuts (50 basis points in September and 25 basis points in October) indicate a potential for lower rates in the coming years [15] Future Outlook - There are indications that interest rates may continue to decline, and spreads between mortgage rates and Treasuries are historically high at around 2.5% [14][16] - If spreads narrow or remain stable, AGNC could benefit significantly, improving its TBV and overall investment environment [17] - With a favorable yield and improved market conditions, AGNC is positioned as a solid investment opportunity under $10, offering potential for both dividend income and moderate stock price appreciation [18]