Is AGNC's Juicy Dividend Finally Safe?

Its past few Safety Net grades have been dismal... ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ 

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View in browser SPONSORED Wall Street Legend Reveals "Profit Stacking" Method Wall Street legend Shah Gilani is issuing his "Profit Stacking" method. First trade drops Thursday 10 a.m. EST. Are you ready? Click here to find out more. Editor's Note: As you've no doubt heard by now, the Federal Reserve cut interest rates by another quarter of a percentage point last week. Every rate cut makes income-generating assets like dividend stocks and bonds even more valuable, but it's also a big deal for another key area of the market: small cap stocks. In fact, in a recent presentation about how his small cap recommendations have returned nearly 3,700% over the past 25 years, Chief Investment Strategist Alexander Green explained, "Fed rate-cutting cycles are almost always like rocket fuel to small caps." Interested in watching the full presentation for yourself? Click here to attend Alex's "Microcap Millionaire Academy" and learn his entire small cap stock-picking system. - James Ogletree, Managing Editor SAFETY NET Is AGNC Investment Corp.'s Juicy Dividend Finally Safe? Marc Lichtenfeld, Chief Income Strategist, The Oxford Club It's been nearly a year since I looked at AGNC Investment Corp. (Nasdaq: AGNC) in Safety Net, which surprised me because it used to be one of the most-requested stocks for this column. Perhaps the fact that the stock has gone nowhere for over a year has dampened investors' enthusiasm. But that big, juicy 15% yield still attracts income investors, so it's time to take another look. In January, I gave the stock an "F" rating for dividend safety because of its track record of cutting its dividend multiple times in the past decade. The good news was that the company was projected to generate enough net interest income, or NII, to afford the dividend. (AGNC Investment Corp. is a mortgage REIT, so we use NII as our measure of cash flow to determine the health of the dividend. NII is simply the difference between the interest the company collects and the interest it pays.) Unfortunately, AGNC was not able to deliver on that good news. In fact, its NII fell to negative territory. Not negative growth, mind you - net interest income itself was negative. That means the company lost money. In 2023, even though its NII was -$246 million, AGNC paid investors $1 billion in dividends. This year, Wall Street forecasts NII to "improve" to -$42 million, and the company is still expected to pay out $1 billion in dividends. View larger image   Despite our chart provocatively pointing out that AGNC makes no money, if you look at the company's third quarter earnings release, you'll notice that it is in fact profitable. Through the first three quarters of the year, AGNC earned $741 million. Why the big discrepancy between earnings and NII? The biggest reason is that the earnings calculation includes $1 billion in unrealized gains on securities. SPONSORED ChatGPT admits... "[Industry X] will grow at the same rate as the AI industry..." But these stocks sell for up to 97% less. Click here for details. However, a company cannot pay dividends from unrealized gains. It's like trying to pay your electric bill with stock that you haven't sold. This is exactly the reason I look at cash flow when examining the safety of a dividend - or NII in the case of a mortgage REIT. It strips away all the nonsense that goes into earnings and tells us how much money the company actually brought in from running its business. Technically speaking, thanks to perfectly legal accounting gimmicks, AGNC is profitable. But its negative NII figure reveals that more money went out the door than came in. Now, AGNC may be able to someday sell those securities, take a $1 billion gain, and use that cash to pay its dividends. But to determine a company's dividend safety, we have to analyze its income from running its business day to day, not from one-time or irregular big gains. So, while AGNC has some decent assets on the books, its ongoing business does not generate enough cash (or any, for that matter) to pay its $0.12 per share quarterly dividend and maintain its 15% yield. Add to that a poor track record of cutting the payout to investors, and you have to consider the dividend extremely unsafe and a strong candidate for a cut. Dividend Safety Rating: F What stock's dividend safety would you like me to analyze next? Leave the ticker in the comments section. You can also take a look to see whether we've written about your favorite stock recently. Just click on the word "Search" at the top right part of the Wealthy Retirement homepage, type in the company name and hit "Enter." Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds or closed-end funds. Leave a Comment BUILD AND PROTECT YOUR WEALTH Buy These Stocks BEFORE President Trump Returns to the Oval Office The Sweet Spot for Small Cap Stocks Top Trader Reveals "One Ticker Payouts": One Ticker... One Trade... Every Week! Managing and Mastering Your Relationship to Money MORE FROM WEALTHY RETIREMENT What Another Trump Term Means for the Market This Fintech Stock Could Be Ready to Roar "Radical Responsibility": The Key to Building Wealth The Ship Has Sailed for This Shipping Company's Dividend Facebook LinkedIn Email Share Push Alert SPONSORED U.S. Government Report Alert Tuesday, November 19 Every Time the Government Releases Jobs, Inflation, GDP and Other Economic Reports... Use The Zero Day Loophole to target up to 253%... 327%... Even 383% Overnight Profits! 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