Key Points
The surge in the 10-year Treasury yield has weighed on AGNC's stock price.
The REIT currently offers a very lucrative monthly income stream.
Shares of AGNC Investment (NASDAQ:AGNC) have tumbled amid a surge in the 10-year Treasury yield, which recently hit a 24-year high. The mortgage REIT is currently down nearly 30% from its 52-week high. That has driven up its dividend yield from about 12% to around 16.5% recently.
Here's a look at how much dividend income you'd collect each month if you invested $10,000 at its current yield.
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A lucrative monthly income stream (but there's a catch)
AGNC Investment recently traded at around $8.75 per share. A $10,000 investment would buy you almost 1,143 shares at that price. The mortgage REIT currently pays a monthly dividend of $0.12 per share. At that rate, you'd collect $137.16 of dividend income each month, or $1,645.92 each year.
That's a lot more income than if you bought shares at its 52-week high of $12.19. At that price, a $10,000 investment would have only purchased 820 shares. That investment would generate about $98.40 of dividend income each month or $1,180.80 each year, 28% less than you'd collect from the same investment today.
These examples showcase one of the risks of investing in AGNC. Its stock typically declines when rates rise, as investors demand higher compensation for its higher risk profile relative to lower-risk investments like the 10-year Treasury. That volatility isn't the only risk. Unlike a 10-year Treasury that pays a fixed rate each year, AGNC's dividend payment isn't fixed. The REIT has cut its dividend several times, most recently in 2020 (from $0.16 per share each month to the current $0.12 monthly rate). Despite the volatility and dividend cuts, AGNC's dividend income has more than offset the decline in its stock price over the years.
AGNC Investment currently offers a much higher dividend yield than it has over the past year. However, that's not a guaranteed income stream. Its stock can also be volatile, as we've seen in the past year. As a result, investors need to have a very high risk tolerance before buying AGNC for income.
Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.