Annaly Capital (NLY) and AGNC Investment (AGNC) stand out in the mortgage REIT sector with their impressive yields of 12.9% and 13.9%, respectively, significantly outpacing the S&P 500’s 1.1% yield. However, potential investors should exercise caution, as both companies have demonstrated volatile dividend histories that may not align with the income stability sought by traditional dividend investors.
While both mREITs aim for total return, their business models differ. AGNC focuses exclusively on agency mortgage securities, minimizing credit risk, but recently reported a decline in book value that overshadowed its dividends. In contrast, Annaly’s diversified approach includes managing non-agency mortgages and a mortgage servicing business, which can provide more consistent cash flow despite higher risks.
For investors prioritizing total returns and diversification, either mREIT can enhance a portfolio. However, those reliant on stable income might want to reconsider, as neither is a dependable dividend stock in the traditional sense.
Source: fool.com