Dynex Capital and AGNC Investment posted substantial 2025 book value gains from agency MBS spread tightening. Current low earnings multiples for DX and AGNC are misleading, as recent results are driven by one-time unrealized gains. Common dividends for both mREITs are unsustainably supported by unrealized gains; long-term cuts are likely as recurring earnings lag payouts.
Multiple mortgage REITs fell by over 10% on the day. The stock driving the bus of bad dropped 33% on Friday and is continuing lower today. Preferred shares and baby bonds have consistently outperformed on a risk-adjusted basis, prompting a portfolio shift towards these instruments for better yield and stability.
AGNC Investment (AGNC) might move higher on growing optimism about its earnings prospects, which is reflected by its upgrade to a Zacks Rank #2 (Buy).
AGNC's Q4 net spread income misses estimates as yields and spreads fall, but comprehensive income rebounds and tangible book value climbs.
AGNC: Solid Book Value Growth But Underwhelming Non-GAAP Earnings
AGNC Investment (AGNC) came out with quarterly earnings of $0.35 per share, missing the Zacks Consensus Estimate of $0.37 per share. This compares to earnings of $0.37 per share a year ago.
AGNC's Q4 results, scheduled to report on Jan. 26, are likely to benefit from lower mortgage rates, stable spreads and rising interest income.
AGNC Investment Corp.'s preferred shares offer over 9% yields, presenting a compelling income opportunity versus the riskier common shares. AGNC's net interest income has stabilized post-rate hikes, aided by effective hedging, though recent hedge reductions may increase risk if rates reverse. Common shares face unreliable dividends and declining tangible book value, making preferreds a more attractive choice for income-focused investors.
AGNC Investment (AGNC) closed at $11.57 in the latest trading session, marking a +1.94% move from the prior day.
AGNC owns government-guaranteed mortgage-backed securities financed by shorter-term borrowing, benefiting from a positive yield curve. AGNC's preferred stock issues have much higher dividend coverage ratios than the common. AGNCZ offers a fixed yield around 8.6% and call protection until 2030, earning a Buy rating.
In the most recent trading session, AGNC Investment (AGNC) closed at $11.07, indicating a +1.28% shift from the previous trading day.
The Yield Curve is Steepening: Short-term repo costs are falling below 4%, immediately boosting cash flow for AGNC Investment Corp.'s unhedged borrowings. Agency MBS "Safety" Advantage: AGNC invests in mortgages guaranteed by Fannie Mae and Freddie Mac, offering minimal credit risk. Flight to Safety Potential: If the labor market weakens, AGNC acts as a "flight to safety" asset that can rally even when the broader stock market panics.