AGNC Investment's dividend yield of over 13.5% faces a new challenge after the Federal Reserve hinted it might start raising interest rates instead of lowering them. The mortgage REIT, which focuses solely on Agency MBS, saw its tangible book value decline 5.6% to $8.38 per share in the first quarter amid increased volatility and higher mortgage rates. CEO Peter Federico noted that MBS supply could be $50 billion to $70 billion lower this year than the previously expected $250 billion, as mortgage rates have risen to around 6.5%. Despite the headwind, AGNC issued $400 million in new shares at a premium to book value, deploying the capital at a levered return of about 16%, which is accretive relative to its dividend yield. The stock continues to trade above $10.50 per share, allowing the REIT to potentially maintain its dividend through accretive investments, though the income stream carries higher risk.
AGNC Investment Corp.Fed hints at rate hikes, increasing mortgage rates and volatility, reducing MBS supply and pressuring AGNC's book value and dividend sustainability.
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