In 2018, I called AGNC Investment Corp.’s (Nasdaq: AGNC) dividend safety the worst I’d ever seen. It received an “F” rating, but only because there is nothing lower than “F” in my SafetyNet Pro rating system.
I said a dividend cut seemed like a sure thing.
I was right. AGNC slashed the dividend less than a year later.
In September 2019, I revisited AGNC. In that article, I said the dividend safety rating of the mortgage real estate investment trust (REIT) was no longer the worst I’d ever seen, but also that I expected another dividend cut was coming.
Sure enough, seven months later, AGNC lowered the dividend to $0.12 from $0.16. It was the company’s ninth cut in 10 years.
Will we get No. 10?
The answer isn’t quite as obvious as it was a year ago. The company’s track record is horrid. Nine dividend cuts in ten years is about as bad a history as you’ll see.
On the other hand, net interest income is expected to rise above what AGNC will pay in dividends for the first time in several years.
(Net interest income is how we measure a mortgage REIT’s cash flow.)
Last year, AGNC generated just $693 million in net interest income while paying out more than $1.14 billion in dividends. So you can see why that was unsustainable.
With the recent cut, the company is now forecast to shell out $895 million in dividends in 2020, which is below the $1.09 billion in net interest income that it is expected to bring in.
So for the first time in a while, AGNC can afford the dividend – if it hits its numbers this year.
AGNC still has to prove itself to me and to SafetyNet Pro. Posting more net interest income this year than it pays in dividends will be a good start.
But like a kid who gets sent to the principal’s office every week, AGNC will have a tough time repairing its reputation. It has a lot of work to do, and it will probably take a few years before it can shake that “serial dividend cutter” label.
Dividend Safety Rating: F
If you have a stock whose dividend safety you’d like me to analyze, leave the ticker symbol in the comments section.
About Marc Lichtenfeld
Marc Lichtenfeld is the Chief Income Strategist of Investment U’s publisher, The Oxford Club. He has more than three decades of experience in the market and a dedicated following of more than 500,000 investors.
After getting his start on the trading desk at Carlin Equities, he moved over to Avalon Research Group as a senior analyst. Over the years, Marc’s commentary has appeared in The Wall Street Journal, Barron’s and U.S. News & World Report, among other outlets. Prior to joining The Oxford Club, he was a senior columnist at Jim Cramer’s TheStreet. Today, he is a sought-after media guest who has appeared on CNBC, Fox Business and Yahoo Finance.
Marc shares his financial advice via The Oxford Club’s free daily e-letter called Wealthy Retirement and a monthly, income-focused newsletter called The Oxford Income Letter. He also runs four subscription-based trading services: Technical Pattern Profits, Penny Options Trader, Oxford Bond Advantage and Predictive Profits.
His first book, Get Rich with Dividends: A Proven System for Earning Double-Digit Returns, achieved bestseller status shortly after its release in 2012, and the second edition was named the 2018 Book of the Year by the Institute for Financial Literacy. It has been published in four languages. In early 2018, Marc released his second book, You Don’t Have to Drive an Uber in Retirement: How to Maintain Your Lifestyle without Getting a Job or Cutting Corners, which hit No. 1 on Amazon’s bestseller list. It was named the 2019 Book of the Year by the Institute for Financial Literacy.
