Share of Agnc Investment ,Again 0.91%, Earlier this year, more than 10% has fallen from its peak. The stock currently trades at less than $ 10 per share. That recession has increased its dividend yield by more than 15%, Which is 10 times more than S&P 500‘S ,^GSPC 0.38%, Dividend yield (less than 1.5%).

There is a look here whether high yielding real estate investment trust shares (REIT) It is worth buying below $ 10.

What is weighed on stock?

This year, volatility AGNC has been the primary factor weighing share price of investment. CEO Peter Federico discusses this issue Mortgage REIT The earnings conference call in the first quarter. He said the tariff policy announced in early April “There was great increase in instability in all financial markets.” This included a sufficient increase in the instability of the interest rate.

The CEO remarked: “This interest rate broke the correspondence of the general financial market due to volatility and comprehensive macroeconomic uncertainty, the liquidity was forced, and investor spirit to be negative. MBS The market was not immune for these adverse conditions, and Too In early April came under significant pressure. ,

Increase in instability negatively affected the value of the company’s portfolio. This caused the company Capital cost The first quarter increased from 16.7% to the beginning of about 18% in the second quarter. This is notable because REITs need to earn an investment return above the cost of capital to cover their dividend payments.

An opportunity for a compelling return right now

While the portfolio value of AgNC declined and this year the cost of capital increased, the company also saw some positivity. The company earns in the first quarter Press releaseFederico commented that “our anticipated portfolio returns have increased favorable with today’s broad spread environment.” He further commented, “At the current assessment levels, we believe that the agency MBS provides a compelling return opportunity on both of them. Submarine And uncontrolled base. ,

Federico along with Return Mathematics on Conference Calls. The CEO highlighted that the way a portfolio had taken AGNC level to its portfolio, it could generate returns in a low-20% range in the current market environment. It easily covers its high cost of capital and therefore, its high-up dividends. Because its “Go-forward returns still align very well with the total cost of capital”According to CEO, dividend is safe,

Risk of exit from alignment

As long as the return of Agnc is aligned with the total cost of capital, the reit can continue to pay its current monthly dividend rate. However, if its return is reduced by its cost of capital, REIT may need to reduce its dividend. It was already to be done several times in the past:

AgNC dividend Data by Ycharts

It is a risk that investors in hostage REITs will need to continuously monitor as the market situation can change rapidly and without warnings. This was the case earlier this year, as unexpectedly high initial tariff rates snatched the market, leading to significant instability in interest rates.

This time, the return increased. However, this will not always be the case. If there is there Important Shock to credit markets, such as What happened During the epidemic and financial crisis, the company’s return may not align with the cost of its capital, making it cut its dividend.

A high-risk, high-inam income stock

There are a high -risk trading model in Agnc Investment. Because of this, there is a high risk that REITs may need to reduce their dividend in the future if the market situation suddenly experiences twist.

Given that, a dip below $ 10 is not necessarily a scream shopping for those looking for a large time of income stream to REIT. It provides an opportunity to earn high reward to a high risk-tolerant investors. In form of Currently high yielding monthly payment. However, it is not a good purchase for those more risk-existence, as it does not provide the most bankable income stream.