History Says AGNC Can Keep Paying Through a Rate Shock: Its Dividend Held as Book Value Fell 38% in 2022
But investors shouldn't overlook its obvious weaknesses.
AGNC, the world's second-largest mortgage real estate investment trust (mREIT), has maintained a forward dividend yield of 16.2% despite significant challenges. This 16.2% yield has been paid continuously since AGNC's IPO in May 2008, even during major interest rate shocks in 2013, 2018, and especially 2022. AGNC, unlike traditional REITs that own physical properties, invests in mortgage-backed securities (MBS).
It generates profits by borrowing short-term and buying longer-term MBS, making it highly sensitive to interest rate fluctuations. Higher rates increase borrowing costs and reduce the value of existing MBS, which can significantly decrease book value. However, AGNC has shown resilience in paying dividends even when book value declines.
During the 2022 rate shock, its book value fell by 38%, yet it continued to pay dividends. In 2024 and 2025, book value recovered as the Federal Reserve cut rates, but net spread and dollar roll income per share remained lower. By the end of 2025, AGNC's book value was $7.13 per share, and by the third quarter of 2026, it had further dropped to $7.13 per share.
Despite this, AGNC's ability to pay dividends even after a 38% book value decline in 2022 is noteworthy. However, its stock price has plummeted from its IPO price of $20 to around $9, and its dividend has dropped from $5.60 to $1.44 per share. While AGNC aims to provide steady income rather than high returns, a further interest rate hike could force a dividend cut.
Thus, despite its tempting current price, AGNC may not be the best investment option compared to more reliable dividend plays.
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