AGNC investment(NASDAQ: AGNC) and Real estate income(NYSE: O) Focus on the payment of dividends. These real estate investment Trust Funds (Reit) own income assets providing cash flow to attractive monthly dividends. AGNC yields are 15%and real estate revenue exceeds 5.5%.
AGNC’s high yields catch the eye, but this does not guarantee that it is a better purchase. Here, take a closer look at which of these two high -income revenue is a stronger investment.
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AGNC is a mortgage reity investing in residential mortgage securities (MBS) that government agencies protect Fannie mae and Freddie Mac; These protective measures reduce credit risk, but MB themselves tend to repay lower fixed income returns, usually at low and middle.
The mortgage reity, such as AGNC, enhances the return by leverage, which means they borrow to buy more MBS. However, this strategy causes increased risk, especially due to interest rate fluctuations. When the rates change, their return on investment can become quite unstable and may result in potential unpredictable income.
AGNC leverage MBS investment strategy can be very profitable. Currently, Reit receives more than 19% of ownership returns from new investment, exceeding its capital price, which includes dividends and costs. As long as the expenses correspond to the return, the AGNC can maintain its dividends, as in 2020. The beginning of the beginning.
Although Agnc Investment has been able to maintain its dividends in recent years, it has reduced the benefit in the past when its income has not covered its expenses. If increasing costs or decreasing returns in the future reduce AGNC profit margins, it could again reduce dividends.
Another risk is related to the AGNC shares, which has declined over time as the company spends more shares to buy new MBS assets. This practice can reduce the value of existing shareholders. From the initial AGNC Public offer (IPO) in 2008, the shares lost more than 50% of their value. High dividends partially compensated for the following loss: General returns, including dividends, from IPO on average 10.7% per year.
Real estate income is a diversified reity, investing in retail trade, industrial, games and other real estate objects secured by long -term net lease contracts. In this rent, tenants need to cover all the operating costs of the property and often include an increase in rent. As a result, they tend to obtain stable and rising income.
This provides real estate income with a solid cash flow basis to support its monthly dividend payment. Reit never diminished and stopped his dividend. Instead, it has steadily increased her benefit. Ever since 1994 The involvement of the public market to the public market, real estate revenue increased 131 times, including in the last 111 quarter in a row. In general, it has increased by 4.2% of the compound annual norm in the last three decades.
The continuous growth of the RITE real estate portfolio is constantly expanding. Real estate income regularly acquires pure rental real estate objects that create durable and steadily increasing rental income. Although real estate income also regularly issues new shares to finance these investments, it only aims to carry out new investments that increase its funds from the operations (FFO) per share. This focus on the increasing value of shareholders allowed to increase its FFO per share more than 5% of the compound annual rate in the last three decades.
This constant growth paid off. Real estate revenue after a public list averaged 15.7% annual return. The average annual increase in the share price was 8.9% and the income of dividends increased.
The investment in the AGNC is designed to collect its high monthly dividend, which constitutes its full return and helps to compensate for the price of the shares due to the release of the shares. If you want an essential monthly income flow and want to agree with the decreasing value of your stock, AGNC is an attractive opportunity.
For a higher overall return, real estate income is a better choice. Reit increases the value of shareholders by expanding its portfolio to support the rising dividend. This determines that it provides the highest long -term overall return compared to AGNC.
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Matt Digallo has real estate revenue positions. The Motley fool occupies positions and recommends real estate revenue. The Motley fool has a disclosure policy.
Better Dividend Campaign: Agnc Investment and Realty Income Originally announced by The Motley Fool
