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58 Monthly Dividends Later and This Ultra-High-Yielder Still Isn't a Dividend Stock You Can Count On

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AGNC Investment (NASDAQ: AGNC) is a mortgage real estate investment trust (REIT). Given that REITs are designed to pass income on to investors in a tax-advantaged manner, it seems logical to believe that the stock, with its huge 14%+ dividend yield, would fit perfectly into a dividend investor's portfolio. That's just not the case, and 58 consecutive monthly dividends don't change that fact. Here's what you need to know before you buy AGNC Investment.

What does AGNC Investment do?

On AGNC Investment's investor services home page, the company tells you exactly what its goal is: "Favorable long-term stockholder returns with a substantial yield component." That's very different from a company that has the goal of providing investors with dividend income. For example, on its investor services home page, property-owning REIT Realty Income describes its purpose as follows: "Realty Income is committed to providing our shareholders with dependable monthly dividends through maintaining a conservative capital structure and prudently planning for the sustainable growth of our platform."

A bear trap with money sitting inside it.
Image source: Getty Images.

Take a step deeper into AGNC Investment's investor services site, and you'll find a review of the REIT's performance. The metric listed is total return, which assumes that all dividends get reinvested. This is the vital key to assessing whether or not AGNC Investment is a good fit for your portfolio.

The truth is that AGNC Investment has a strong track record when it comes to total return. The company proudly highlights that its total return is 10% annualized since its initial public offering in May 2008 through to year-end 2024. It is a perfectly fine way for an investor to get exposure to the mortgage sector, and investors focused on asset allocation would be wise to consider it.

However, that doesn't make it a reliable income stock. Any investor who is trying to live off their dividend income should think carefully before they are lured in by the siren song of that 14%+ dividend yield.

The proof is in AGNC Investment's dividend record

Most income investors are looking for a dividend that gets paid reliably and, most likely, grows over time. The reason is pretty simple to understand, given that most income investors are trying to live off the dividend income their portfolios generate. The 58 consecutive monthly dividend payments that AGNC Investment has paid at the same level since 2020 sound reasonable enough on that score.

But don't forget the pernicious effect of inflation, which eats away at the value of money over time. There was a massive spike in inflation following the coronavirus pandemic, during which food got more expensive. But the buying power of AGNC Investment's dividend didn't increase along with it. That dividend stayed the same, so each check an investor collected and spent didn't buy as much as the one before it.