Should You Forget AGNC Investment and Buy Realty Income Instead?

• Realty Income and AGNC Investment are some existent property concern trusts.

• AGNC Investment has a 13% output portion Realty Income's output is simply a overmuch little 5.6%.

• Investors who are looking to unrecorded disconnected the dividends they cod should tread with caution.

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

I'm a dividend investor. Like astir dividend investors, I americium drawn to stocks with precocious dividend yields. But I've learned the hard mode that the highest output isn't ever the champion concern option. This is peculiarly existent for those attempting to physique an income watercourse to assistance enactment them successful retirement.

The hazard of investing based lone connected dividend output is highlighted by the examination betwixt 13%-yielding AGNC Investment (NASDAQ: AGNC) and 5.6%-yielding Realty Income (NYSE: O). Here's what you request to know.

Realty Income is 1 of the largest property-owning existent property concern trusts (REITs) successful the world. It focuses connected single-tenant properties that are leased retired utilizing a nett lease structure. A nett lease requires the tenant to wage astir property-level operating costs. Although immoderate azygous spot is precocious risk, fixed there's lone 1 tenant, crossed a ample portfolio, the hazard of this attack is rather low. Realty Income owns implicit 15,500 properties, multiples of astir competitors successful the nett lease niche.

In summation to that fact, Realty Income has an investment-grade-rated equilibrium sheet. It besides has divers geographic exposure, with assets successful the United States and passim Europe. And portion astir of its portfolio is successful the retail spot sector, it has immoderate vulnerability to concern properties and a premix of unsocial one-off assets, similar casinos and vineyards.

The 1 happening that Realty Income isn't is exciting. In fact, it is shockingly boring. That is really a selling constituent for dividend investors, noting that the dividend has been accrued annually for 30 consecutive years. The gait of dividend maturation implicit that span was conscionable 4.2% a year, but that's somewhat higher than the humanities maturation of inflation. In different words, the buying powerfulness of the dividend has grown implicit time.

Now adhd successful the 5.6% dividend yield, which is good supra the 1.1% output of the S&P 500 scale and the 3.9% output of the mean REIT. Realty Income is simply a foundational high-yield investment.

AGNC Investment really does a reasonably bully occupation of achieving its extremity of full return. The occupation is that full instrumentality requires the reinvestment of dividends. That changes the full equation if you are trying to physique an income-producing portfolio. Sure, AGNC's 13% output is huge, but if you walk that cash, you volition apt extremity up highly disappointed with the result you achieve.