Dividend investors are often drawn to high yields like moths to a flame. When it comes to yields today, there are few that are loftier than AGNC Investment's (NASDAQ: AGNC) 15%-plus dividend yield. Yet if history is any guide, most investors would be better off buying the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) instead, even though it only has a relatively modest 1.8% yield. Here's why.

What do AGNC Investment and Vanguard Dividend Appreciation ETF do?

AGNC Investment is a mortgage real estate investment trust (mREIT). That's a fairly complex niche within the broader REIT sector. AGNC Investment buys mortgages that have been rolled up into bond-like investments, often making use of leverage to do so. Mortgage securities prices can be impacted by interest rates, housing market dynamics, and mortgage repayment trends, among other things. And they trade all day, so stocks like AGNC Investment can be fairly volatile.

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Image source: Getty Images.

The Vanguard Dividend Appreciation ETF is a diversified exchange-traded fund (ETF). It tracks the S&P U.S. Dividend Growers index. That index starts by taking all of the U.S. companies that have increased their dividends for at least 10 consecutive years and then removes the highest yielding 25% of the list. The rest get into the index (and the ETF) based on a market cap weighting. Note that it is specifically avoiding the highest-yielding stocks.

Income versus total return and back to income again

Here's the interesting thing: AGNC Investment is very clear that income is not its primary goal. Management says its goal is "Favorable long-term stockholder returns with a substantial yield component." That means that delivering a strong total return, which assumes dividend reinvestment, is the main goal, and AGNC Investment has done reasonably well at hitting that target.

AGNC Total Return Level data by YCharts.

Looking at the entire span that both AGNC Investment and Vanguard Dividend Appreciation ETF have existed, AGNC Investment has provided a slightly better total return. But take a look at the dividend and price history of each of these investments. After early spikes in the dividend and price of AGNC, it has been all downhill. By contrast, the Vanguard Dividend Appreciation ETF's dividend payouts and share price have both generally risen over time.

AGNC data by YCharts.

A strong total return is great, but that metric is based on the assumption that you're reinvesting your dividends. Income investors are usually looking to live off of the dividends their investments generate, which means spending them. As the chart above makes very clear, AGNC Investment's dividend payouts haven't been sustainable, while the smaller payouts from Vanguard Dividend Appreciation ETF were sustainable and generally grew over time.

In fact, AGNC Investment has over time reduced its payouts by more than 60% while the total payouts from the components of the Vanguard Dividend Appreciation ETF have increased by more than 200%. For someone whose plans over that period involved using the dividends their portfolio generated to help cover their living expenses, it's pretty clear which investment would have been the better choice.

AGNC isn't a bad investment

AGNC Investment isn't a bad investment -- it's just one that requires a more nuanced view. Yes, its dividend yield is huge, but that doesn't necessarily make it a good income stock. The real gains from owning it come from reinvesting the dividends and focusing on total return, which is not what most dividend investors are likely to be doing. If you are trying to live off of the income your portfolio generates, the Vanguard Dividend Appreciation ETF, despite its much lower yield, will probably be a better choice for your portfolio.

Should you invest $1,000 in AGNC Investment Corp. right now?

Before you buy stock in AGNC Investment Corp., consider this:

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

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*Stock Advisor returns as of June 2, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF. The Motley Fool has a disclosure policy.

AGNC Investment (NASDAQ: AGNC) has a gigantic 15%+ dividend yield. That lofty yield sounds very enticing, but sometimes things that sound too good to be true are, in fact, too good to be true. Here's why investors need to take a very nuanced view of AGNC Investment and how the company may actually be helping you decide when to buy the stock.

What does AGNC Investment do?

Property-owning real estate investment trusts (REITs) buy physical properties and lease them out to tenants. That's what you would do if you owned a rental property, so it's probably fairly easy to wrap your head around the business model. Mortgage REITs like AGNC Investment buy mortgages that have been pooled together into bond-like securities. That's a lot more complex and you probably couldn't mimic that in your own investment life.

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Image source: Getty Images.

Everything from interest rates to mortgage repayment rates can impact the value of mortgage securities. So even tracking what is going on within AGNC Investment's portfolio, or within any mortgage REIT, would be hard for most investors. Adding to the complexity is that mortgage securities trade all day long, so the portfolio's characteristics can change fairly quickly.

This is not an investment for conservative income investors. That fact is highlighted by the steady downtrend in the dividend over the last decade or so, as the chart below highlights. Not surprisingly, the price of the stock has trailed the falling dividend.

AGNC data by YCharts

What is AGNC Investment worth?

That said, AGNC Investment's value is basically the value of its portfolio of mortgage securities. In that way it is kind of similar to a mutual fund. And, like a mutual fund, AGNC Investment reports the value of its portfolio on a per-share basis. It calls this number tangible net book value per share. It only reports that number quarterly, but it is an important figure to monitor.

At the end of the first quarter of 2025 AGNC Investment's tangible net book value per share was $8.25. At the end of the first quarter of 2022 it was $13.12. Tangible net book value per share can rise and fall fairly dramatically at times, depending on the market environment. Over the past year, for example, this metric has risen and fallen by 5% between quarters multiple times. It is, at best, a rough gauge for investors to monitor between quarters.

But the really interesting thing here is that AGNC Investment's stock price often trades above tangible net book value per share. Sometimes dramatically above the number -- the 52-week high is $10.85 even though the reported tangible net book value per share never rose above $8.84 in any of the last four quarters.

This is great news for shareholders, since AGNC Investment frequently sells new shares to the public to raise additional capital. Every penny above tangible net book value that a new buyer pays is tantamount to giving current shareholders free money. Management even explains this fact when it discusses stock sales, saying things like the company "opportunistically" raised money "at a considerable premium to tangible net book value" and that this brings "meaningful book value accretion to our common stockholders."

AGNC data by YCharts

The takeaway here is pretty clear. Nobody should pay more than tangible net book value per share for AGNC Investment unless they believe that number is going to be headed sharply higher. But sometimes AGNC Investment's share price dips below that figure, with the 52-week low coming in at $7.85. The company would likely not be raising capital at that price, given that it would destroy value for current shareholders. However, if you buy the stock on the open market below book value you are increasing the chances that you are getting a good deal on the stock.

AGNC data by YCharts

The fly in the ointment is the dividend

The problem with this discussion is that it doesn't address the dividend or the dividend yield. That's because the company's focus isn't income, it is total return. The dividend is a part of total return, but total return assumes the dividend is reinvested. But a key part of total return is also the price you pay for the investment.

If you bought at the 52-week high price of $10.85 per share, your total return would be terrible here even with the huge dividend yield. However, if you kept a close eye on tangible book value per share and only bought when the stock price was at or below the last reported figure, your total return would likely still be positive, helped along by that lofty yield.

Should you invest $1,000 in AGNC Investment Corp. right now?

Before you buy stock in AGNC Investment Corp., consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AGNC Investment Corp. wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 173% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

There are many ways to make some passive income. Investing in real estate and high-yielding dividend stocks are two tried-and-true methods. You can combine those options to collect some lucrative dividend income by investing in real estate investment trusts (REITs) with high dividend yields.

For example, investing $11,250 across the following four high-yielding REITs can generate over $1,000 of dividend income each year:

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Data source: Google Finance and the author's calculations.

These REITs also pay their dividends monthly, making them ideal for those seeking to collect regular passive income to help cover their recurring expenses.

AGNC Investment

AGNC Investment is a mortgage REIT focused on investing in residential mortgage-backed securities (MBS) guaranteed against credit losses by government agencies like Fannie Mae. That makes these mortgage pools very low-risk investments. They're also relatively low-returning investments (low-to-mid single-digit yields).

Image source: Getty Images.

AGNC uses leverage to earn higher returns. This investment strategy can be very lucrative. CEO Peter Federico commented on the REIT's first-quarter conference call, "A portfolio of swaps levered the way we lever them would generate a return in the low 20%." That's a high-enough return to cover the REIT's current dividend and operating expenses, which is why it remains comfortable with its high yield.

AGNC has a higher risk profile than other REITs because a sudden shift in market conditions could impact its returns and ability to maintain its dividend, which investors need to monitor.

Realty Income

Realty Income has been one of the most reliable dividend stocks over the years. It recently declared its 659th consecutive monthly dividend. The REIT has increased its payment for 110 straight quarters and all 30 years that it has been a public company, growing it at a 4.3% compound annual rate. It has also delivered positive earnings growth in 29 of those 30 years.

A big factor driving its consistency is its portfolio. Realty Income owns a diversified portfolio of net lease properties (retail, industrial, gaming, and others). Net leases provide it with very stable rental income because they require tenants to cover all property operating expenses, including routine maintenance, real estate taxes, and building insurance.

Realty Income also has a top-tier financial profile, which enables it to steadily invest in additional income-generating properties. That steady stream of new properties empowers the REIT to routinely increase its high-yielding monthly dividend.

Healthpeak Properties

Healthpeak Properties is a healthcare REIT. It owns outpatient medical, lab, and senior housing properties. The company's diversified portfolio works together as a cohesive unit focused on healthcare discovery and delivery. Its properties will benefit from the aging of the U.S. population and the desire for better health.

Those catalysts drive stable and growing demand for space in its portfolio of high-quality healthcare properties, supporting rising rental income for the REIT. Healthpeak also has a healthy financial profile, which allows it to invest in new properties to expand its portfolio (it currently has $500 million to $1 billion of dry powder to make new investments). These drivers should enable Healthpeak to increase its high-yielding payout in the future (it recently started growing its dividend, providing investors with a 2% raise).

EPR Properties

EPR Properties specializes in investing in experiential real estate. It owns movie theaters, eat-and-play venues, fitness and wellness properties, and other attractions. The company also has a small educational property portfolio. These properties provide it with steady rental income, backed primarily by net leases.

The REIT currently has the financial capacity to invest $200 million to $300 million into new properties each year. EPR Properties has already lined up $148 million of experiential development and redevelopment projects it expects to fund over the next two years, including financing the construction of a private golf club in Georgia, its first traditional golf investment. That investment rate should drive 3% to 4% annual growth in its cash flow per share, which should support a similar dividend growth rate (it raised its payout by 3.5% earlier this year).

Big-time passive income stocks

REITs are often great investments for those seeking to generate passive income. Many have high dividend yields, which enable you to produce more income from every dollar you invest. Meanwhile, AGNC Investment, Realty Income, EPR Properties, and Healthpeak Properties all pay monthly dividends, which is ideal since they better align your income with your expenses. Most of those REITs should also steadily increase their payouts, which should enable you to collect even more passive income in the future.

Should you invest $1,000 in AGNC Investment Corp. right now?

Before you buy stock in AGNC Investment Corp., consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AGNC Investment Corp. wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $635,275!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,385!*

Now, it’s worth noting Stock Advisor’s total average return is 967% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 12, 2025

Matt DiLallo has positions in EPR Properties and Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends EPR Properties and Healthpeak Properties. The Motley Fool has a disclosure policy.

Market volatility has increased significantly this year. The Trump administration's introduction of reciprocal tariffs spooked the market, causing concerns that we could be heading toward a recession. That drove investors to sell off stocks and bonds as they repositioned their portfolios to better navigate the current period of uncertainty.

These market changes have already had some impact on AGNC Investment (NASDAQ: AGNC). Despite that, the mortgage REIT remains comfortable with its current monthly dividend level, which gives it an eye-popping yield of more than 16%.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Turbulent times

The CEO of AGNC Investment, Peter Federico, discussed the recent market shift on the company's first-quarter earnings conference call. He commented that the tariff policy announcement earlier this month "caused volatility to increase significantly across all financial markets." The issue is that "with the breadth and magnitude of the tariffs being greater than anticipated, recession fears increased materially."

As a result, stock prices tumbled, and "interest rate volatility also increased substantially. Federico noted that "This interest rate volatility and broad macroeconomic uncertainty caused normal financial market correlations to break down, liquidity to become constrained, and investor sentiment to turn negative." He also stated that the agency MBS market, which is AGNC's investment focus, "was not immune to these adverse conditions and also came under significant pressure in early April."

On a positive note, "AGNC was well prepared for the recent market volatility and navigated it without issue," stated the CEO. However, he commented, "AGNC's net asset value was negatively impacted by the mortgage spread widening."

Still at a comfortable level

Given the recent market volatility and the decline in the book value of the company's assets, an analyst on the call asked about the management's comfort level with the dividend.

Federico responded by reminding investors that AGNC's benchmark for dividend stability is its total cost of capital. He went through the math on the call:

At the end of the first quarter, our total cost of capital and the way we're calculating our total cost of capital is the dividends that we pay both on our common and preferred stock, plus all of our operating expenses divided by our total tangible capital which at the end of the first quarter was about $9.5 billion. And by that measure, it would say that the breakeven return on our portfolio to sustain all of those costs was 16.7%.

That's the return hurdle the company needed to exceed on MBS investments to maintain its dividend.

However, that was the benchmark at the end of the first quarter. The numbers have shifted since volatility increased in the early part of the second quarter. Federico stated that if you calculate it based on more recent numbers, it's "probably closer to 18%."

The good news is that the returns it can earn on MBS investments have also increased amid the market's volatility. The CEO stated that "a portfolio of swaps levered the way we lever them would generate a return in the low 20%." Federico noted that "those are historically high levels." That drives his belief that "at current valuation levels, we believe Agency MBS provide investors with a compelling return opportunity."

Given all this, and to answer the question, Federico believes that even with the recent decline in its book value, the increase in returns puts them at a level that still aligns well with its total cost of capital. The REIT remains comfortable with the current dividend level.

Still safe for now

AGNC Investment believes it can continue paying its current dividend level, even with all the recent changes in the market. It looks like an enticing option for those seeking a monster monthly income stream.

However, it is very much a high-risk, high-reward income stock. If market conditions shift again, and its investment returns no longer align with its cost of capital, AGNC might need to reduce its dividend, which it has done several times over the years. It's not the best dividend stock to buy if you're seeking a reliable income stream that can withstand future market turbulence.

Should you invest $1,000 in AGNC Investment Corp. right now?

Before you buy stock in AGNC Investment Corp., consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AGNC Investment Corp. wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $594,046!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $680,390!*

Now, it’s worth noting Stock Advisor’s total average return is 872% — a market-crushing outperformance compared to 160% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.