It's been a volatile start to the year for AGNC Investment (AGNC +0.92%), but the stock has crept back into positive territory following its first-quarter earnings report, and it still sports a more than 13% dividend yield.
AGNC is a mortgage real estate investment trust (mREIT) that holds an assortment of agency mortgage-backed securities (MBS). Because these bonds are backed by government agencies, they carry virtually no default risk, but their carrying values are greatly affected by movements in mortgage spreads and interest rates.
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One nice positive in the quarter was that AGNC generated $0.42 per share in net spread and income from dollar rolls (a hedging strategy used in MBS markets to avoid losses when MBS values decline). This is what AGNC generally uses to pay out its dividend, and it was a strong number boosted by an increase in its average interest spread.
AGNC generates income from the spread between the MBS it holds and its funding costs, so the average interest spread is an important metric. It rose from 1.81% in the December quarter to 2.06% in Q1.
Volatile MBS values
The war in Iran, not surprisingly, spurred a flight to safety, widening the yield spread between Treasury yields and MBS. This reversed an earlier tightening of spreads to start the year after President Donald Trump asked government agencies Fannie Mae and Freddie Mac (together referred to as government-sponsored enterprises, or GSEs) to buy $200 billion of agency MBS.
The result was that AGNC's tangible book value (TBV) dropped $0.50 per share to $8.38 at the end of Q1 from $8.88 at the end of 2025. TBV is essentially the value of AGNC's MBS portfolio, and the metric on which mREITs are typically valued. Positively, the company said its TBV has already rebounded 6% in April, or 5% after taking its dividend accrual into account.
AGNC paid out $0.36 per share in dividends in the quarter. When combined with its drop in TBV, this gave it a total economic return on tangible common equity of negative 1.6%.
NASDAQ: AGNC
Key Data Points
Is it time to buy the stock?
AGNC's net spread and income from dollar rolls fell below its dividend payout in the fourth quarter, so Q1 was a nice bounce-back quarter for the mREIT. Meanwhile, its TBV has recovered in April. If the war ends soon, the environment for MBS seems much more favorable as the government looks to improve housing affordability, including the GSEs potentially buying agency MBS.
As such, I think income-oriented investors who can stomach some volatility can buy this high-yield stock today.
