Better Dividend Stock: AGNC Investment vs. Ares Capital

• AGNC Investment and Ares Capital connection precise charismatic dividend yields that entreaty to income-focused investors.

• AGNC invests chiefly successful mortgage-backed securities (MBSs) portion Ares Capital is simply a concern improvement institution (BDC) that lends to middle-market companies.

• Both companies are delicate to changes successful involvement rates, but successful antithetic ways.

• 10 stocks we similar amended than AGNC Investment Corp. ›

If you're an capitalist looking to make passive income from your portfolio, dividend stocks are for you. Companies that wage dividends thin to outperform those that don't, but not each dividend payers are created equal. Some companies prioritize dividend growth, portion others absorption connected achieving precocious dividend yields.

Two stocks with precise appealing dividend yields are AGNC Investment (NASDAQ: AGNC) and Ares Capital (NASDAQ: ARCC), which connection yields of 12.7% and 9.4%, respectively. This tin marque these stocks highly appealing to investors prioritizing income implicit growth. However, they are chiseled businesses with varying risks, and are not perfect for each investor.

If you're weighing an concern successful high-yield stocks, here's what to cognize astir AGNC Investment and Ares Capital.

AGNC Investment is simply a existent property concern spot (REIT) that invests chiefly successful mortgage-backed securities (MBSs). It differs from different REITs due to the fact that it doesn't ain carnal buildings that it leases oregon rents. Instead, the institution invests successful bundles of location loans utilizing leverage, which is however it tin wage a double-digit percent dividend yield.

The institution invests chiefly successful bureau MBSs, which are mortgages guaranteed by government-sponsored entities, specified arsenic Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). These loans transportation little hazard due to the fact that they are backed by the afloat religion and recognition of the U.S. government.

However, to foodstuff returns, AGNC uses leverage, borrowing short-term done repurchase agreements oregon different indebtedness (with repayment periods mostly of little than a year) and investing those funds successful semipermanent MBS. As of Sept. 30, AGNC's at-risk leverage ratio was astir 7.5 times its tangible nett publication value. As a result, its net and publication worth tin fluctuate based connected changes successful the output curve.

Ares Capital operates arsenic a concern improvement institution (BDC). Both BDCs and REITs are pass-through entities that are legally required to administer astir each of their taxable income to investors, which is wherefore they person precocious dividend yields. Besides that, they are precise antithetic businesses.