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AGNC Investment Corp (NASDAQ:AGNC) is a popular choice among income investors looking for high returns. As a publicly traded mortgage real estate investment trust (mREIT), AGNC offers an impressive forward yield of 14.71% and pays monthly dividends. However, while the yield may be attractive, AGNC’s total returns haven’t exactly been reliable in recent years, with a stagnant dividend and a falling share price.
Investors looking for a high-yield mortgage REIT with less downside risk may want to consider an alternative option.
AGNC Investment Corp: A Closer Look
AGNC invests primarily in Agency residential mortgage-backed securities (Agency MBS), which are guaranteed against credit losses by government-sponsored entities such as Fannie Mae, Freddie Mac or Ginnie Mae. The company uses leverage to improve returns and finances its investments primarily through repurchase agreements.
Although AGNC has paid its shareholders a substantial monthly dividend, the company’s recent financial results have been mixed. In the first quarter of 2024, AGNC reported comprehensive income of $366 million, or $0.48 per common share, compared to $1.00 per share in the prior quarter, but up from a loss of $0.07 per share in the prior-year quarter. first quarter of 2023.
Despite its high dividend yield, AGNC’s total return has been -16.96% over the past three years and a dismal 6.09% over the past five years. This underlines the potential risks associated with investing in high-yield REITs.
The Ascent Income Fund: an attractive alternative
For investors looking for higher returns with potentially lower volatility, the Ascent income fund, brought to you by EquityMultiple, presents an intriguing opportunity. Structured as a private mortgage REIT, the fund focuses on private credit investments, targeting stable income from senior commercial real estate debt positions.
A key benefit of investing in a private REIT like the Ascent Income Fund is that the share price is directly tied to the fund’s net asset value (NAV) and is not subject to the vagaries of the stock market. This can provide investors with a more stable and predictable return profile compared to publicly traded REITs.
The Ascent Income Fund has several attractive features:
High yield: The fund has a historical return of 12.1%, which may be lower than AGNC’s forward return of 14.7%, but higher than the three-year return on costs of just 8.25%.
Downside protection: The fund invests in various types of senior debt, with loan-to-value ratios ranging from 50% to 75%, compared to Agency MBS with loan-to-value ratios as high as 80% to more than 100%.
Favorable market conditions: The current macroeconomic environment, characterized by rising interest rates and reduced competition from regional banks, makes it opportune to invest in real estate bonds. The Ascent Income Fund is well positioned to benefit from these market dislocations.
Although the Ascent Income Fund’s minimum investment is $5,000 for novice investors, compared to the low entry point of publicly traded REITs, the potential for higher risk-adjusted returns and the expertise of EquityMultiple’s management team make it an attractive option for income-oriented investors. investors.
Click here for more information about EquityMultiple’s Ascent Income Fund.
It comes down to
While AGNC Investment Corp’s 14.7% dividend yield may be tempting, the stock price volatility and the company’s stagnant dividend make this a highly speculative strategy. For investors looking for an alternative that offers the potential for high returns with lower volatility, the Ascent Income Fund is worth considering.
As a private mortgage REIT, the Ascent Income Fund provides exposure to real estate debt investments, focusing on stable income from senior positions in commercial real estate loans. With a historic return of 12.1%, favorable market conditions and the expertise of EquityMultiple’s management team, the fund offers an attractive opportunity for income-oriented investors looking to diversify beyond listed REITs.
As with any investment, it is essential to conduct thorough due diligence and consider your individual financial objectives and risk tolerance before making a decision. However, for those looking for a high-yield alternative to AGNC Investment Corp, the Ascent Income Fund is certainly worth a closer look.
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