Why AGNC Investment Stock Surged 11.2% in December
Shares of AGNC Investment (NASDAQ: AGNC) rallied by 11.2% in December, according to data provided by S&P Global Market Intelligence. Two catalysts propelled the mortgage real estate investment trust (REIT) higher. First, it declared its latest monthly dividend payment, maintaining its double-digit percentage yield. On top of that, the Federal Reserve indicated that it will likely reduce interest rates in 2024, which could benefit the company.
When AGNC Investment declared its latest monthly dividend in mid-December, it kept its payout rate at $0.12 per share. That's the level it has maintained since April 2020, when it reduced its monthly payment from $0.16 per share.
Before that reaffirmation, there had been some concern that the REIT might trim its payout again. On the company's third-quarter conference call in October, CEO Peter Federico said, "one of the primary factors that we evaluate in setting our dividend is the economic return that we expect to earn on our portfolio at current MBS valuation levels." He noted that at the company's current dividend yield (15%), its total capital cost was over 16% when adding in operating expenses. That meant it needed to earn a more than 16% return on equity to fund its operations and dividend. That's not a problem now, given that it can earn a levered return percentage in the mid-teens to low-20s range. However, the CEO said the company will continue to evaluate the dividend as market conditions and expected returns change.
Source Fool.com
