AGNC Funding Corp. (Nasdaq: AGNC) is without doubt one of the most requested shares within the Security Internet column due to its excessive yield. Right this moment, the mortgage dealer yields 14%, so you possibly can perceive why it’s so widespread.
However does it deserve its adulation from the revenue investing crowd?
Extra importantly, can these buyers depend on that juicy 14% yield?
Once I final checked out AGNC’s dividend security in January, the corporate had not but reported fourth quarter 2022 outcomes. At the moment, internet curiosity revenue (NII) was forecast to be $1.5 billion for 2022, falling to $1.3 billion in 2023.
AGNC didn’t come near hitting final 12 months’s projection.
NII totaled $965 million, down from $1.29 billion the 12 months earlier than. The excellent news is that NII is now anticipated to rise to $1.37 billion this 12 months.
There’s extra excellent news. AGNC paid shareholders $869 million in dividends, or 90% of NII.
For a mortgage actual property funding belief, something beneath 100% is stable. This 12 months’s estimated $894 million in dividends will likely be simply 65% of the projected $1.37 billion in NII – a fair higher margin.
So the dividend seems high quality if AGNC comes anyplace near the estimates.
Nonetheless, AGNC has a horrid observe document in the case of its dividend.
You’ll be able to see how typically the corporate has lower the dividend previously 12 years. The dividend has fallen all the best way from $5.60 to $1.44 yearly.
In January, the inventory’s dividend security score was an “F.” With this dividend-cutting observe document and the truth that the corporate’s NII fell sharply final 12 months, the score hasn’t improved…
Proper now, the payout ratio is low, which is optimistic. However the firm clearly isn’t afraid to slash the dividend when the going will get powerful.
There’s a saying that goes, “When an individual reveals you who they’re, consider them.”
The identical goes for dividend payers.
When an organization reveals you it’s a serial dividend cutter, consider it.
Dividend Security Score: F
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