AGNC Investment has positioned itself as a leading player in the realm of dividend stocks, particularly for investors seeking regular income. This mortgage-focused real estate investment trust (REIT) boasts an impressive yield that exceeds 13%, making it a tantalizing option for those looking for passive income. In fact, AGNC’s payout is ten times greater than the average dividend yield of the S&P 500. The appeal lies in its monthly dividend distributions, which offer a consistent revenue stream for investors.
Yet, one downside to this investment is the lack of growth in its dividend payouts. The returns that investors realize from AGNC primarily stem from its monthly distributions, as the REIT has not increased its dividend since it made cuts during the pandemic. This has been an ongoing trend, as past adjustments have been necessary due to factors like fluctuating interest rates impacting earnings.
For a more dynamic investment with a high dividend yield, consider EPR Properties, another REIT that offers a competitive yield above 7%. Unlike AGNC, EPR is on a trajectory of growth and has increased its dividend payouts over time, driven by the expansion of its portfolio and cash flow. EPR’s investments span experiential venues and entertainment properties, creating a niche that allows for steady revenue generation.
AGNC currently maintains a monthly dividend of $0.12 per share, accumulating to $1.44 annually, a rate it has held since the pandemic-related reductions. Its investment strategy is centered around mortgage-backed securities (MBS) backed by government agencies. The fluctuations in interest rates can lead to variations in earnings, thus affecting dividend stability. For instance, when interest rates decline and borrowers refinance their mortgages, AGNC’s income from its investment portfolio can be diminished, necessitating dividends adjustments in the past.
Despite a 45% drop in AGNC’s stock price since its public debut in 2008, the REIT has delivered a remarkable 450% total return, equating to an annualized return of approximately 11%, predominantly through dividends. With recent actions from the Federal Reserve to lower interest rates, AGNC’s borrowing costs may also diminish, helping maintain dividend payments. However, investors should be aware that if stock price appreciation is a priority, they may want to look elsewhere, as AGNC’s model focuses heavily on fixed income with less potential for capital gains.
EPR Properties presents a more enticing opportunity for those looking to benefit from potential price appreciation alongside robust dividends. It has a significant focus on experiential real estate, acquiring and leasing properties that include movie theaters and amusement parks. The company operates under long-term net leases that require tenants to manage operating expenses and provide an annual rent increase of around 1.5% to 2%. This underlying structure creates a predictable income stream for the REIT, allowing EPR Properties to increase its dividends, evidenced by a recent 3.6% increase earlier this year.
In addition to sustaining its dividend growth, EPR Properties plans to ramp up investments significantly. With an earmarked budget of $200 million to $300 million for new projects, the company is strategically positioned to expand its footprint in the experiential sector. The capacity for internal funding derived from free cash flow and a robust balance sheet could further enhance growth prospects as interest rates decline and capital costs decrease. Its impressive total return history, marked by a staggering 1,300% increase since its launch in 1997, highlights its potential for future performance.
While AGNC Investment offers reliability with its stable monthly dividend, its growth opportunities are limited, catering primarily to investors seeking fixed income. Conversely, for those looking for excitement and growth potential, EPR Properties stands out as an appealing choice. By offering appealing dividends while positioning itself for future growth, EPR may be more suitable for investors looking to enhance their wealth and income over time.
Before making any investment decisions, especially regarding AGNC Investment Corp, consider exploring other potential opportunities identified by experts. Staying informed and savvy about market dynamics can ultimately shape your investment outcomes as you navigate the complex landscape of stocks and REITs.
AGNC may provide reliable dividends, but for those seeking a more well-rounded investment strategy incorporating growth, EPR Properties could very well be the investment you’ve been looking for.