Simple REIT Analysis – AGNC

Reading Time: 5 minutes    

If you’re like me you may not have a whole lot of money twiddling its thumbs and waiting to be deployed in an investment property. But guess what, that’s totally fine. You can still be a property investor via REITs. Apart from the high yield offered by REITs since they have to pay out 90% of their earnings to investors is liquidity, you also get diversification into the real estate market.


Generally, you need a lot of money to buy an investment property. Then you need to take other steps like advertise and find tenants, put it up for rent, slowly collect rental income over time, make sure you claim the property properly on your taxes, and eventually get back your return on investment and then turn a profit. And if you want to sell, you’ll need to put that house up for sale which includes, most likely fixing it up a bit, finding a buyer, and completing closing paperwork among other little tasks in between.


But with REITs, you invest when you want and withdrawal when you want with simple clicks right on the computer screen in seconds. And Tom Vilord, president and CEO of Wall Street Value states he likes “REITs because they give us an opportunity to invest in real estate without having the hassles of being a landlord or financing a project”. With that, today I want to do a Simple REIT Analysis and the chosen one for this activity is AGNC Investment Corporation – symbol AGNC. As always, I’m not a professional stock or investment picker. Please do conduct your own research when selecting investments and please don’t be mad at me if you buy something as a result of my positive review or don’t buy something as a result of my negative review 🙂



AGNC History


AGNC is a REIT located in the affluent town of Bethesda, MD. AGNC was established in 2008 and since then now has a portfolio of almost $63 billion in securities in residential and mortgage-back instruments. I know mortgage back securities are a big reason for the 2008 recession, right? And I’m not saying this investment does not come with risk either. Per Seeking Alpha, the greatest risk for AGNC would be due to another housing crisis. However, they also state this could be minimal “considering the new regulations (e.g. Dodd Frank, Basel I, II and II).”



AGNC Financials



As you can see below via Google Finance, it has been paying the same 18 cent dividend every month for the past year. That equates to over a 10% yield, which is insane! But of course REITs are known to pay high income to shareholders and that along with diversification into real estate are the main reasons why investors buy into them.


agnc simple money man


For comparison purposes, AGNC’s divided is higher than a competitor NLY – Annaly Capital Management (a REIT based out of New York). AGNC pays .18 per month so $2.16 per year, whereas NLY pays .30 quarterly amounting $1.20 a year – difference in dividend income of .96 cents. So if someone were to invest $5,000, this is what it would look like – using round numbers:



Investment Shares – AGNC Share – NLY Annual Income – AGNC Annual Income – NLY
$5,000 231 402 $499




A common metric used to evaluate REITs is Funds From Operations FFO = NI + Amortization + Deprecation – Gain on Sale of Assets. This metric is comparable to EPS in stocks. I didn’t recalculate FFO but instead extracted it from the experts. Wall Street Journal has AGNC’s FFO as 274M for 3/31/17. If we take this 274M/355.6M shares outstanding per chart above, then the FFO is 0.77 per share. If we compare this to EQR (another residential REIT), its FFO is 293M/367.30M shares outstanding = .79 per share, slightly higher than AGNC. However, EQR has declined in its FFO Growth at -9.38 since quarter ending 12/31/16 as compared to AGNC which has declined at a much slower pace at -5.52%.  As a result, AGNC may have a greater ability to continue paying out its dividend payments to investors.



AGNC Management


AGNC’s Director, Chief Executive Officer, President and Chief Investment Officer is Gary Klein. He has been in the residential real-estate market starting with Freddie Mac for 22 years. The next person up is Peter J. Federico who is Executive Vice President and Chief Financial Officer. He has been with AGNC since 2011. He began is rea-estate experience also with Freddie Mac in 1988 – almost 30 years ago. For a full list please refer to AGNC’s personnel webpage.



AGNC Comparison


According to Morningstar, one of AGNC’s Peers is Equity Residential, a REIT located in Chicago IL. It became a public REIT on the NYSE in 1993. Per the comparison chart below, over the past year, AGNC has out-performed by ~8%. And as mentioned earlier, the yield on AGNC is higher at 10.22 as compared with EQR at 3.00.


EQR simple money man



AGNC could warrant further investigation as a REIT to add in my portfolio. The fine people at Seeking Alpha like it too: “AGNC pays out a very attractive yield and in our opinion, is generating that yield with a reasonable amount of risk.” For now I should check underlying holdings within my existing portfolio to see if I already have some shares 🙂


Sneak Peak: On a side note, guess what? I recently purchased shares of another REIT: KIMCO Realty – KIM. I was looking into undervalued stocks and this one popped up from my friends at Motley Fool. KIM’s portfolio is strong against a recession as it has “grocery stores, warehouse clubs, and off-price retailers, many of which are growing their store count.”  Stay tuned as there may be another Simple REIT Analysis in the near future 🙂



So how do you feel about REITs in general? Are they included in your portfolio? Do you believe REITs are only worthwhile when the housing market is doing well? What are your thoughts concerning AGNC?





I use Personal Capital because (1) it’s free, (2) it tracks all of my accounts and overall net worth, (3) my account balances automatically update, (4) it shows how my investments are diversified and allocated in various sectors, and (5) can use built-in tools like “Investment Checkup” to get….wait for it…free personalized advice!