Better Dividend Stock: AGNC Investment vs. Realty Income

AGNC Investment (AGNC) and Realty Income (O) have something in common: they both like to pay out dividends. It’s their thing. If dividends were a party, these two would be the ones showing up with the most party favors-meaning cash. They’re both REITs, a special breed of real estate investment trust that owns income-generating assets and spits out monthly dividends like a cash fountain. But just because AGNC flashes a 15% yield doesn’t mean it’s the life of the party. Let’s dive in.

Look, AGNC’s high yield is like that mysterious, alluring stranger at the bar. Intriguing, sure. But is it good for you? Let’s break it down and see if it’s the right kind of high-risk, high-reward investment or just a fun flirtation that ends in tears.

A higher-risk, higher-reward income stock

AGNC is a mortgage REIT, which means it primarily invests in residential mortgage-backed securities (MBS). These securities are about as secure as your grandmother’s old china cabinet, thanks to the backing of Fannie Mae and Freddie Mac. So, the credit risk? Low. But here’s the catch: the returns on these MBS are about as thrilling as a soggy biscuit-low-to-mid single digits. What AGNC does, however, is get a bit more… inventive. It cranks up the risk by borrowing to buy even more MBS. Leverage. Not always a party trick that ends well, but sometimes it works, especially when interest rates are behaving.

But here’s the real kicker: interest rates can turn on you faster than your ex at a wedding. If they rise, the leveraged investments become more volatile. The kind of volatility that could give you heart palpitations while you check your portfolio at 3 a.m. It’s thrilling if you like unpredictability. Otherwise, it’s just nerve-wracking.

Now, AGNC has been able to pull off some impressive returns recently-over 19% return on equity from new investments. Not bad, right? But here’s the thing: it has a history of cutting dividends when income doesn’t match up to costs. And trust me, nobody likes a dividend cut. Ask anyone who’s been in a relationship with someone who suddenly loses interest. It’s not a good look.

The stock price, though? That’s a different story. AGNC has been slowly leaking value since its IPO in 2008. A slow, steady decline as more shares are issued to buy MBS assets, which dilutes the value for existing shareholders. Ouch. But hey, the dividend helps cushion the blow, with total returns averaging 10.7% annually since the IPO. It’s like someone telling you, “I know I’ve been distant, but here’s a nice gift to make up for it.” Sweet, but is it enough?

Growing its dividend and value

Now, Realty Income-this one’s different. It’s like the dependable partner in a long-term relationship. It’s a diversified REIT, focusing on retail, industrial, gaming, and more, with tenants paying for all the operating expenses. These leases, in theory, create a rock-solid income stream that keeps growing over time. Because let’s face it, who doesn’t like predictable growth?

Realty Income doesn’t just hand out dividends; it’s practically a dividend machine. And not just that-it’s the type of REIT that makes sure it increases its payout without fail. Since 1994, it has raised its dividend 131 times. And for the past 111 quarters, it’s been on a consistent streak. That’s a level of reliability you rarely see in today’s world. Realty Income has also managed to grow its dividend at a compound annual rate of 4.2% over three decades. Not too shabby, right?

But don’t be fooled into thinking it’s just about dividends. Realty Income is a growth machine, expanding its portfolio with properties that generate more rent over time. They issue new shares, sure, but always with a purpose-to increase funds from operations (FFO) per share. This strategy has resulted in an FFO per share growth rate of more than 5% annually. Talk about strategy.

With all this growth, Realty Income has delivered an average annual total return of 15.7% since it went public. An 8.9% annual increase in share price plus growing dividends? That’s the kind of relationship we all dream about.

Higher total returns for less risk

If you’re in it purely for the dividend, AGNC is your go-to, as long as you’re cool with the share price decline. It’s like agreeing to go on a rollercoaster with the promise of a free drink at the end. If you’re willing to take on risk for that juicy yield, it’s an option. But be ready for a few stomach-churning drops along the way.

However, if you’re looking for more long-term stability and a higher return that doesn’t involve watching your shares lose value, Realty Income is the one you want. Its strategy of buying properties that pay off and increasing shareholder value has made it a far safer bet for higher returns. Less drama, more dividends, and, frankly, a lot less worrying at 3 a.m. when you’re checking your portfolio.

So, do you want the wild ride or the steady hand? It’s up to you. Just don’t say I didn’t warn you. 😌

2025-08-20 15:04

A higher-risk, higher-reward income stock

Growing its dividend and value

Higher total returns for less risk

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