Matt DiLallo, The Motley Fool

Thu, Jun 12, 2025, 6:05 PM5 min read

• Shares of AGNC Investment have fallen below $10 a share this year due to increased market volatility.

• The REIT's returns have also increased, which keeps its costs aligned.

• If its returns get out of alignment with its cost of capital, the REIT might need to reduce its dividend.

• 10 stocks we like better than AGNC Investment Corp. ›

Shares of AGNC Investment (NASDAQ: AGNC) have fallen more than 10% from their peak earlier this year. The stock currently trades at less than $10 per share. That slump has driven up its dividend yield to more than 15%, which is over 10 times higher than the S&P 500's (SNPINDEX: ^GSPC) dividend yield (less than 1.5%).

Here's a look at whether shares of the high-yielding real estate investment trust (REIT) are worth buying below $10.

This year, volatility has been the primary factor weighing AGNC Investment's stock price. CEO Peter Federico discussed this issue on the mortgage REIT's first-quarter earnings conference call. He noted that the tariff policy announcement in early April "caused volatility to increase significantly across all financial markets." That included a substantial increase in interest rate volatility.

The CEO commented: "This interest rate volatility and broad macroeconomic uncertainty caused normal financial market correlations to break down, liquidity to become constrained, and investor sentiment to turn negative. The agency MBS market was not immune to these adverse conditions, and also came under significant pressure in early April."

The increase in volatility negatively impacted the value of the company's portfolio. That caused the company's cost of capital to rise from 16.7% in the first quarter to nearly 18% early in the second quarter. That's noteworthy because the REIT needs to earn an investment return above its cost of capital to cover its dividend payments.

While AGNC's portfolio value declined and its cost of capital increased this year, the company also saw some positives. In the company's first-quarter earnings press release, Federico remarked that "our anticipated portfolio returns have increased commensurately with today's wider spread environment." He further commented, "At current valuation levels, we believe Agency MBS offers investors a compelling return opportunity on both a levered and unlevered basis."

Federico ran through the returns math on the accompanying conference call. The CEO highlighted that a portfolio levered the way AGNC levers its portfolio can generate a return in the low-20% range in the current market environment. That easily covers its now-higher cost of capital and, therefore, its high-yielding dividend. Because its "go-forward returns still align very well with that total cost of capital" right now, according to the CEO, the dividend is safe.