AGNC Investment Inc. AGNC shares have dipped 11.6% in the past three months against the industry’s decline of 8.5%. The decrease in AGNC share price follows a broader industry trend, which is facing challenges due to volatility in mortgage rates, given several evolving factors.
Meanwhile, AGNC peers, Annaly Capital Management NLY and Arbor Realty Trust ABR, declined 5% and 21.4%, respectively, over the past three months.
Price Performance
Zacks Investment Research
Image Source: Zacks Investment Research
Though AGNC shares witnessed a fall in recent months, given market volatility, it offers favorable long-term stockholder returns with a huge dividend yield, which may tempt many investors to buy the stock. Let us evaluate various factors at play to decipher whether the AGNC stock is worth including in your portfolio now.
AGNC & Mortgage Rates
AGNC Investment's performance and prospects are significantly influenced by the interest rate environment. Decisions related to the Federal Reserve’s monetary policy have a huge impact on the company's performance, and analyst projections are heavily influenced by market expectations for possible rate cuts.
AGNC’s financials have been adversely impacted since early 2022, when the Fed began its interest rate hiking cycle. The negative return and falling profitability raised concerns about the company’s capacity to sustain its high-yielding payment. Higher rates led to a surge in AGNC's borrowing costs, which resulted in a net interest income (NII) of just $18 million in 2024, significantly lower than the $965 million recorded in 2022.
However, as the Fed lowered interest rates by 100 basis points in 2024, it supported the company’s NII in the first quarter of 2025. In the quarter, NII was $159 million against a negative net interest income of $30 million in the prior-year quarter.
Mortgage rates have been witnessing a slight decline lately. Per a Freddie Mac report, the average rate on a 30-year fixed-rate mortgage was 6.76% as of May 8, 2025, down from 7.09% in the same week a year ago.
With relatively lower mortgage rates, origination and refinancing activities will increase in the upcoming period. This will likely help boost AGNC's NII and the book value of its portfolio.
AGNC Investment & Attractive Dividend Yield
One of the closely watched aspects of AGNC Investment’s financial profile is its dividend policy.
AGNC’s current dividend yield is 16.38%. This is impressive compared with the industry’s average of 12.03% and attracts investors as it represents a steady income stream. It currently sits at a payout ratio of 81%.
AGNC Investment's peers, Annaly Capital Management and Arbor Realty, are also providing investors with solid dividend options. Annaly Capital Management has an annual dividend yield of 14.56%, whereas Arbor Realty Trust has a dividend yield of 16.6%.
Dividends aside, AGNC has a share repurchase plan in place. In October 2024, the company’s board of directors terminated the existing stock repurchase plan and replaced it with a new plan authorizing it to repurchase up to $1 billion of common stock through Dec. 31, 2026.
AGNC Investment & Agency MBS Outlook
AGNC has maintained its focus on agency mortgage-backed securities (RMBS), a strategy that has positioned it as a strong player in this specialized market segment.
AGNC Investment primarily focuses on leveraged investments in Agency RMBS, including residential mortgage pass-through securities and collateralized mortgage obligations. A U.S. Government agency or a U.S. Government-sponsored enterprise guarantees the principal and interest payments for such investments.
The fundamental outlook for fixed income, particularly agency MBS assets, has shown signs of improvement lately. However, following the April tariff announcement, financial market volatility increased substantially, and Agency MBS spreads to benchmark rates widened.
Nonetheless, with its conservative leverage profile and ample liquidity, AGNC was well-positioned for this instability. Given this, AGNC Investment generated a positive economic return of 2.4% in the first quarter of 2025, driven by the company’s compelling monthly dividend.
Moreover, management believes that Agency MBS offers investors a compelling return opportunity for AGNC. Although the market is extremely competitive, the company's focus on agency MBS puts it in a position to possibly profit from favorable trends. However, execution will be crucial to achieving these advantages.
Should You Buy AGNC Stock Now?
Given the volatility in the mortgage market, AGNC continues to witness persistent earnings pressure, which poses a significant challenge.
Earnings Estimates
Zacks Investment Research
Image Source: Zacks Investment Research
Nonetheless, the favorable Agency MBS outlook will likely provide a tailwind to the company’s revenue growth.
Sales Estimates
Zacks Investment Research
Image Source: Zacks Investment Research
Given relatively lower mortgage rates, the origination and refinancing activities will increase. That could be a strong tailwind for the company in the upcoming period.
From a valuation standpoint, AGNC Investment appears inexpensive relative to the industry. The company is currently trading at a discount with a forward 12-month price-to-earnings (P/E) multiple of 5.36X, below the industry average of 7.74X. AGNC Investment is also trading at a discount compared with Annaly Capital Management and Arbor Realty Trust’s forward 12-month P/E of 6.66X and 8.44X, respectively.
Price-to-Earnings F12M
Zacks Investment Research
Image Source: Zacks Investment Research
Hence, considering the pros and cons of AGNC, we may conclude that investors can consider parking their cash in the AGNC stock at the current level, given its strong fundamentals. Also, its ultra-high dividend yield and opportunities to grow in a declining rate environment make it worth adding to the portfolio.
AGNC Investment currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
