Where Will AGNC Investment Stock Be in 5 Years?
The mREIT's prospects could improve if interest rates decline again.
AGNC Investment (AGNC) is the world's second-largest mortgage real estate investment trust (mREIT), offering a substantial forward dividend yield of 17.6%. However, its stock has plummeted by nearly 50% over the past five years, resulting in a meager total return of 2%. AGNC's woes stem from its unique business model, which involves purchasing mortgage-backed securities (MBS) and borrowing at short-term rates to finance longer-term MBS.
This model thrives when interest rates are low, but struggles when rising rates increase borrowing costs and diminish the value of existing MBS. The Federal Reserve's aggressive rate hikes in 2022 and 2023 exacerbated AGNC's predicament, causing its book value per share to plummet from $15.75 in 2021 to $8.88 in 2025 and $7.13 in Q3 2026.
The company's profitability indicators, such as net spread and dollar roll income per share, also declined from $3.11 in 2021 to $1.50 in 2025. Despite the Fed's decision to maintain rates in 2024 and 2025, AGNC's financial situation remained precarious, with its stock trading slightly above its book value but five times its estimated net spread and dollar roll income per share for 2026.
The company's recent announcement of a $1 billion buyback plan, contingent on its stock price falling below its book value, provides a limited upside potential. Analysts forecast a slight dip in AGNC's net spread and dollar roll income per share to $1.49 by 2028, yet it is expected to comfortably cover its forward dividend rate of $1.44 per share.
However, AGNC's track record of cutting dividends during downturns and its failure to raise dividends since 2020 raises concerns. If AGNC can maintain its net spread and dollar roll income per share at $1.50 per share through 2031, and its stock trades at ten times that estimate, it could potentially rise to $11.50 within the next five years.
This steadier recovery, coupled with its attractive double-digit dividend yield, could enable AGNC to outperform or at least match the S&P 500 (^GSPC -0.46%). The Motley Fool's Stock Advisor, which has historically delivered exceptional returns, recommends AGNC as one of the 10 best stocks to buy now, available to subscribers.
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