AGNC Investment (AGNC -0.10%) It is a productive dividend stock. The mortgage-focused real estate investment trust (REIT) currently pays a monthly dividend that yields more than 14%. This is 10 times more than before S&P 500 (1.3% yield).

mortgage REIT Paid monster dividends for 55 months in a row. That’s pretty impressive considering the market conditions it’s endured over the past few years. The environment is expected to be much more positive in the futureThe REIT’s massive dividends look safe.

Stability in a more turbulent time

AGNC Investment very simple strategy. The agency invests in mortgage-backed securities (MBSesPools of residential mortgages protected from default risk by government agencies such as Fannie Mae. That’s why these fixed income investments It produces very low risk returns.

Yields on agency MBSs are also relatively low (mid to high single digits). The mortgage REIT can increase its return by using leverage (i.e., borrowing money) to purchase more MBSe. It makes money from the difference between borrowing costs and the return on MBS investments. The wider the spread, the more money can be made.

AGNC Investment made enough money to cover its own expenses. flow Dividend payment for the last four and a half years. This is notable because the last few years have been a more challenging period in the MBS market due to the significant increase in interest rates. High interest rates increased the REIT’s borrowing costs and narrowed its investment range.

But conditions never got to the point where the REIT needed to cut its dividend, something it has had to do several times in the past:

AGNC Dividend data Y Charts

We are entering a more positive era

AGNC Investment CEO Peter Federico commented on ideal market conditions for the REIT in its third-quarter earnings report. He noted that “AGNC’s return opportunities are optimal when the spread of MBS to benchmark interest rates is wide and stable and interest rates and monetary policy are less volatile.” In other words, stable market conditions are ideal because they provide a lot of visibility into earning ability.

For much of the last few years, the Agency MBS market has been more volatile due to uncertainty regarding interest rates. However, the outlook for the MBS market is much better than it has been in the past few years, with the Federal Reserve recently changing its policy from fighting inflation with high interest rates to a more neutral stance with lower interest rates. The REIT believes MBS spreads will stabilize at historically positive levels over the next one to two years as the Fed slowly lowers interest rates. This should ensure that the company earns enough money to continue covering its high-yielding dividend.

Considering this perspective, Federico said: third quarter meeting He said the REIT’s management team “feels good about our dividend policy and our alignment with the economics of our portfolio.” Unless there is a significant unforeseen fluctuation in the credit markets, the REIT will be able to continue to maintain its current dividend level in the coming months.

Providing stability in a challenging period

AGNC Investment has maintained dividend stability over the past 55 months despite what has been a more turbulent period for the agency MBS market. As market conditions are expected to improve as the Fed continues to lower interest rates, the mortgage REIT is expected to be able to maintain its current dividend policy in the coming months. While a REIT is a higher-risk dividend stock due to its use of leverage, it can continue to provide dividends. very rewarding income stream if conditions do not deteriorate unexpectedly.