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AGNC Investment Corp (NASDAQ:AGNC) is a popular choice among income investors seeking high yields. As a publicly traded mortgage real estate investment trust (mREIT), AGNC offers an impressive forward yield of 14.71% and pays its dividends monthly. However, while the yield may be enticing, AGNC’s total returns have been less than reliable in recent years with a stagnant dividend and declining share price.

Investors looking for a high-yield mortgage REIT with less downside risk may want to consider an alternative option.

AGNC Investment Corp: A Closer Look

AGNC invests primarily in Agency residential mortgage-backed securities (Agency MBS), which are guaranteed against credit losses by government-sponsored entities like Fannie Mae, Freddie Mac or Ginnie Mae. The company uses leverage to enhance returns, financing its investments mainly through repurchase agreements.

While AGNC has been delivering a substantial monthly dividend to its shareholders, the company’s recent financial results have been mixed. In Q1 2024, AGNC reported a comprehensive income of $366 million, or $0.48 per common share, compared to $1.00 per share in the previous quarter but up from a loss of $0.07 per share during the first quarter of 2023.

Despite the high dividend yield, AGNC’s total return has been -16.96% over the past three years and a dismal 6.09% over the past five years. This highlights the potential risks associated with investing in high-yield REITs.

The Ascent Income Fund: A Compelling Alternative

For investors seeking higher yields with potentially lower volatility, the Ascent Income Fund, offered by EquityMultiple, presents an intriguing opportunity. The fund is structured as a private mortgage REIT and focuses on private credit investments, targeting stable income from senior commercial real estate debt positions.

One key advantage of investing in a private REIT like the Ascent Income Fund is that its share price is directly tied to the fund’s net asset value (NAV) rather than being subject to the whims of the stock market. This can provide investors with a more stable and predictable return profile compared to publicly traded REITs.

The Ascent Income Fund boasts several attractive features:

High Yield: The fund has a historical yield of 12.1%, which may be lower than AGNC’s forward yield of 14.7%, but higher than its three-year yield on cost of only 8.25%.

Downside Protection: The fund invests in various types of senior debt, with loan-to-value ratios ranging from 50% to 75%, compared to Agency MBS with loan-to-value ratios as high as 80% to over 100%.

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Favorable Market Conditions: The current macroeconomic environment, characterized by rising interest rates and reduced competition from regional banks, makes it opportune to invest in real estate debt. The Ascent Income Fund is well-positioned to capitalize on these market dislocations.

While the Ascent Income Fund’s minimum investment is $5,000 for first-time investors, compared to the low entry point of publicly traded REITs, the potential for higher risk-adjusted returns and the expertise of EquityMultiple’s management team make it a compelling option for income-focused investors.

Click here to learn more about the Ascent Income Fund from EquityMultiple.

The Bottom Line

While AGNC Investment Corp’s 14.7% dividend yield may be tempting, the company’s share price volatility and stagnant dividend make it a highly speculative play. For investors seeking an alternative that offers the potential for high yields with lower volatility, the Ascent Income Fund is worth considering.

As a private mortgage REIT, the Ascent Income Fund provides exposure to real estate debt investments, targeting stable income from senior positions in commercial real estate loans. With a historical yield of 12.1%, favorable market conditions and the expertise of EquityMultiple’s management team, the fund presents a compelling opportunity for income-focused investors looking to diversify beyond publicly traded REITs.

As with any investment, it’s essential to conduct thorough due diligence and consider your individual financial goals and risk tolerance before making a decision. However, for those seeking a high-yield alternative to AGNC Investment Corp, the Ascent Income Fund is definitely worth a closer look.

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This article Thinking Of Buying AGNC Investment Corp For Its 14.7% Yield? Consider This Alternative originally appeared on Benzinga.com