AGNC Investments (AGNC -0.73%) offers one whopper of a dividend. The mortgage-focused real estate investment trust (REIT) currently yields an eye-popping 16%. That's over 10x higher than the S&P 500's dividend yield.

While there's reason to be optimistic that the mortgage REIT can maintain its big-time payout in 2024, its long-term sustainability remains a big question mark, given its history. Because of that, it's probably not worth the headache of dealing with another dividend cut.

Instead, yield-hungry investors should consider buying Energy Transfer (ET 0.16%). The master limited partnership (MLP) offers a 9.5%-yielding distribution that it should be able to steadily increase in the future.

On shaky ground

AGNC Investments invests in residential mortgage-backed securities (MBS), which are guaranteed against credit losses by government agencies like Fannie Mae and Freddie Mac. The company's business model makes it more like a bank than a traditional REIT that owns income-producing commercial real estate.

The company uses shareholder capital that it leverages with short-term borrowings to buy MBS. The REIT makes money on the spread between where it borrows money and the interest income generated by its MBS investments. It uses those profits to pay a monthly dividend.

This business model can be very profitable. However, earnings can also be very volatile since changes in interest rates can affect the company's profit margin.

That volatility has forced AGNC Investments to cut its dividend several times over the years. Since it switched to paying monthly dividends in 2014, AGNC has cut its dividend four times, steadily reducing its monthly payment from $0.22 per share to the current rate of $0.12 per share.

The company's management team discussed the dividend's future on its third-quarter conference call. CEO Peter Federico stated: "We do not provide forward guidance for our dividends, but I do want to share some thoughts on the dividend in the current environment...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 went on to point out that the company's dividend yield has increased considerably over the past couple of years, due to the decline in its share price. That's increasing its cost of capital.

The good news is that the company is currently earning a high enough return to maintain its dividend rate. However, the CEO noted, "We continuously evaluate our dividend as market conditions, expected returns, and risk management considerations are always changing." If any of those factors deteriorate, the company might need to reduce its dividend again.

Heading higher

Energy Transfer has a very different business model. The MLP owns and operates energy midstream assets, like pipelines, processing plants, and storage facilities. These assets generate very predictable and stable cash flow. The company gets about 90% of its earnings from long-term, fixed-rate contracts and government-regulated rate structures.

Meanwhile, despite its high yield, Energy Transfer distributes a conservative percentage of its cash flow to investors (a little over 50%). That enables it to retain money to fund expansion projects and maintain a strong balance sheet.

The company expects to invest about $2 billion to $3 billion on growth projects each year (27% to 40% of its cash flow), including around $2 billion in 2023. In addition to organic growth, the MLP has a long history of making value-enhancing acquisitions. This year, it made two meaningful deals -- the $1.5 billion acquisition of Lotus Midstream and its $7.1 billion merger with Crestwood Equity Partners -- which should boost its free cash flow.

The company's growing cash flow is giving it the fuel to increase its already massive cash distribution, and it plans to raise its payout by 3% to 5% annually. That visible dividend growth stands in stark contrast to AGNC Investments, which might need to cut its dividend again if market conditions deteriorate.

A more sustainable income stream

AGNC Investments' big-time dividend could see another cut in the future. The risk of another reduction is why it's not worth the headache for yield-seeking investors.

Instead, they should consider Energy Transfer's similarly massive payout, which the MLP expects to grow in the coming years. That more sustainable and steadily rising stream of cash is a better option for income-seeking investors.