AGNC Investment Corp. (AGNC - Get Rating) in Bethesda, Md., operates as a real estate investment trust (REIT) in the United States. The company invests in residential mortgage pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a United States government-sponsored enterprise or by a United States government agency.

AGNC is highly popular among income investors because of its high dividend yield. AGNC’s $1.44 annual dividend yields 10.71% at its current share price. On February 10, AGNC declared a $0.12 per share of common stock dividend, payable on March 9, 2022. However, the company’s dividend payouts have decreased 12.6% over the past three years and 7.3% over the past five years. In addition, the company has $47.59 billion in total debt. And AGNC’s trailing-12-month cash balance is $11.79 billion, translating to net debt of $35.80 billion, while its trailing-12-month net operating cash flow came in at $1.57 billion. Furthermore, it has a current ratio and a quick ratio of 0.22 and 0.21, respectively, which question its ability to meet its short-term obligations.

AGNC’s shares have slumped 20.7% in price over the past year and 12.9% year-to-date. The stock has declined 18.6% over the past six months to close yesterday’s trading session at $13.10.

Here is what could shape AGNC’s performance in the near term:

Bleak Financial Performance in its Last Reported Quarter

For its fiscal fourth quarter, ended Dec. 31, AGNC’s comprehensive net income came in at a negative $137 million, representing a substantial decline from its $218 million prior quarter value. Its net spread and dollar roll income available to common stockholders stood at $351 million, down 10.9% quarter-over-quarter, while its net spread and dollar roll income per common share declined 10.7% sequentially to $0.67. Its tangible net book value per common share as of Dec. 31, 2021, was $15.75, reflecting a 4% decrease from $16.41 per common share as of Sept. 30, 2021.

Bleak Analysts’ Expectations

Analysts expect AGNC’s revenues to decline 54.3% year-over-year to $241.10 million in the current quarter, ending March 31, 2022. Also, its revenue is expected to decrease 26.4% year-over-year in the current year. In addition, the consensus EPS estimates indicate a 13.2% decline in the current quarter, 17.1% in the next quarter, and 18.2% in the current year. And its EPS is expected to decline 1.8% per annum over the next five years.

Stable Profit Margins

AGNC’s 100% gross profit margin is 58.4% higher than the 63.12% industry average. Also, its 89.49% net income margin is 193.4% higher than the 30.51% industry average. 

POWR Ratings Reflect Uncertain Prospects

AGNC has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of B for Quality, which is consistent with its stable profit margins.

AGNC also has a D grade for Sentiment. Bleak analyst sentiment about the stock justifies this grade.

Among the 29 stocks in the REITs – Mortgage industry, AGNC is ranked #16.

Beyond what I have stated above, one can view AGNC’s Value, Growth, Momentum, and Stability grades here.

View the top-rated stocks in the REITs – Mortgage industry here.

Bottom Line

AGNC is a high-yielding dividend stock and is favored by income investors. However, its current debt position could be concerning. Furthermore, this year’s anticipated interest rate hikes could be a significant headwind for REITs and keep AGNC under pressure. So, we think it could be wise to wait for more clarity in the Fed’s rate hike plan before investing in the stock.

How Does AGNC Investment Corp. (AGNC) Stack Up Against its Peers?

While AGNC has an overall POWR C Rating, one might want to consider taking a look at its industry peers, MFA Financial, Inc. (MFA - Get Rating), TPG RE Finance Trust, Inc. (TRTX - Get Rating), and Great Ajax Corp. (AJX - Get Rating), which have a B (Buy) rating.

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