This 17% monster with an instruction of monthly dividends believes that this is a convincing investment in the current environment

Investment Agnc (Nasdaq: agnc) to one of the highest dividend yields The arrivald. At more than 17%, it is more than 10 times higher than the wider market (the S&P 500's Dividends yield is less than 1.5%).

Usually a Dividends yield This top tends to indicate that a cut is to come. However, a reduction in payment doesn't seem to be In cards for investment agn. Instead, the company estimates that it is a good investment in the current market.

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The Investment Agnc is a real estate investment trust (Reit) which invests in titles backed by mortgages (MBS) protected against credit risk by government agencies such as Freddie Mac. For this reason, these are very low risk investments. Given the low -risk profiles of MBS, Agnc Investment uses lever To improve its yields.

Although the use of leverage increases the risk profile of the reit, he does not think that this strategy will cause problems to the company in the middle the current Market instability. Instead, CEO Peter Federico declared in the report on the first quarter results of his conviction that “with our conservative lever profile and our great liquidity at the end of the quarter, Agnc was well positioned for this instability”. He noted that the company had finished the first quarter with a “tangible” lever effect at risk of 7.5x and a substantial liquidity position of $ 6 billion in cash and unused agency funds. ” It is a significant quantity of liquidity compared to its investment portfolio of $ 78.9 billion.

There is a lot of uncertainty on the market these days concerning the impact of prices on the economy. There are growing concerns that they could cause a major recession. This could have a major impact on stock market yields.

However, the image of MBS investments is much brighter despite all the uncertainty. In the recent report on the benefits of the AGNC, Federico said: “In the first quarter, the prospect that the potential actions of government policy could have a negative impact on economic growth and accelerate inflationary pressures made that the feeling of investors becomes resolutely more prudent. These concerns, in turn, initially led to high content in terms of rest and societies American, ACS and categories – Aelets superior to a roll This contributed to increasing the reit yields during this period. Its investment portfolio produced an economic return of 2.4%, while its shares distributed a total return of 7.8% to investors despite a drop in the stock market.

The volatility of the market only increased in the second quarter according to the announcement of the April rate. Consequently, “the MBS agency spreads to the expired reference rates,“” noted Federico. However, the CEO pointed out: “Although the widening of the MBS agency spreads has led to a modest decrease in our tangible accounting valueOur planned portfolio yields have increased proportional to the broader propagation environment today. In addition, at current assessment levels, we believe that the MBS agency offer Investors A convincing return opportunity both on a basis of aafness and not launched.“”

The company's ability to generate convincing return in the current environment is remarkable. This is because, as Federico pointed out in the past, Its yields, not its earnings, are the main engine of the real dividend policy. Add the convincing return potential to the low lever and liquidity effect of the company, and it should be able to continue to cover its monthly monster dividend.

Agnc Investment believes that it is in a solid position to resist the current market instability. Her solid financial situation allows her to continue to invest in what she considers a convincing environment for MBS. For this reason, he should continue to generate a high enough return to maintain his monthly monster dividend. This lucrative income flow can provide investors with a significant and tangible yield in an environment where yields could be difficult to find.

However, Agnc is not without risk. If the market conditions deteriorate considerably, the yields of the FPI could suffer from it, which could have it cut its dividend, which it has done several times in the past. For this reason, this is not the best option for investors in search of a bankable income flow.

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Matt Dilallo Has no position in the actions mentioned. The Motley Fool has no position in the actions mentioned. The Word's madman has a Disclosure policy.

This 17% monster with an instruction of monthly dividends believes that this is a convincing investment in the current environment was initially published by the Motley Fool

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