With an Over 16% Yield, Is Now the Time to Buy AGNC Stock?
2026-10-22 23:05
•Geoffrey Seiler •The Motley Fool
••••• •••••••••••••••• Axe Cap view
Is AGNC's High Yield Worth the Risk?
AGNC Investment offers a 16%+ dividend yield despite a sharp drop in book value, but US interest rate risks remain.
AGNC Investment is trading at an eye-catching yield north of 16%, driven by its holdings in mortgage-backed securities (MBS) that currently yield about 6.5%. The sharp 17% decline in tangible book value last quarter signals how rising interest rates are chipping away at the value of these securities. Still, AGNC covers dividends comfortably with net spread income, suggesting the payout might hold. For South African investors, this is a play on US interest rate expectations and the risk that rates could climb higher despite the market pricing in hikes already. The rand’s sensitivity to US bond moves adds complexity – a stronger dollar may strengthen the yield in ZAR terms but also increases risk. With no direct JSE equivalent, AGNC is a niche, yield-seeker’s option with clear interest rate and FX exposure. If the Fed surprises with additional hikes or the dollar weakens unexpectedly, this trade could sour quickly. this is just our opinion and not financial advice
Wait to buy AGNC until there’s clearer signs that US rate hikes are over and the dollar stabilizes against the rand. Short-term yield looks attractive, but risks are high.
- USD/ZAR
- AGNC
- Further Fed rate hikes
- Volatile USD/ZAR exchange rate
4/10
AGNC Investment, a mortgage REIT holding agency-backed mortgage-backed securities, saw its tangible book value decline nearly 17% in Q3 due to rising interest rates. However, the article suggests this may present a buying opportunity as MBS yields are now attractive at 6.5%, future Fed rate hikes appear priced in, and the company continues to cover its 16%+ dividend yield with solid net spread income.
Our take is based on reporting first published by The Motley Fool.