There is one very big reason to be attracted to AGNC Investment (AGNC -0.21%) and several big reasons you might want to avoid it. Here's a look at whether or not AGNC Investment is a buy right now, or if it is one of those stocks that you'll always want to avoid. Be prepared; this is one complex investment.

What does AGNC Investment do?

AGNC Investment is a real estate investment trust (REIT) that buys mortgages that have been bundled into bond-like securities. This is nothing like a property-owning REIT, which is fairly easy to understand. (You would basically do what a property-owning REIT does if you had a rental property, just on a smaller scale.) The bond-like securities AGNC Investment buys trade all day long, are impacted by changes in interest rates, and can be affected by property market dynamics, too, like repayment rates and housing demand.

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While you might be able to buy a property-owning REIT and set it on autopilot, you probably won't want to do that with AGNC Investment. That said, in order to really understand what is going on with the mortgage REIT you'll need to take the time to understand the mortgage market. So there's more work required up front as you educate yourself about the company and the industry in which it operates. And there's more ongoing work as you attempt to keep tabs on how management is performing.

Even the REIT's huge 15% dividend yield may not be worth all of the extra effort for some investors. And if you are a risk-averse investor, well, you probably won't want to step into this story, either.

The problem with AGNC Investment's dividend

AGNC Investment's huge yield comes with notable costs, beyond the time commitment to understand the investment. The graph below should scare most investors away, noting that the dividend has been on a long downtrend with the stock price following along for the ride. Basically, if you were spending those dividends, you ended up with less income and less capital. Not ideal.

AGNC data by YCharts

And yet the next graph seems to suggest a vastly different outcome. AGNC Investment's total return has been quite strong. Basically, AGNC Investment's total return, which assumes dividend reinvestment, is nearly as good as that of the S&P 500 index (^GSPC 0.61%). If you are looking for mortgage exposure to fill in a segment of an asset allocation model, this REIT would be a solid choice. The asset allocation approach is normally used by large investors, such as pension funds, but some small investors do it, too.

AGNC Total Return Level data by YCharts

This is where analyzing the dividend comes in. When AGNC Investment IPO'ed in 2008, it was priced at $20 per share. Today the shares trade for around $9.50, leading to a share price decline of approximately $10.50 per share. That's bad. However, through the end of 2024 AGNC Investment has paid a total of $48.64 in dividends. So investors have received $37.14 per share in dividends over and above the loss they have suffered in AGNC Investment's share price. This is why reinvesting the dividends has resulted in such an impressive total return.

That, however, doesn't change the fact that you would have been let down if you bought AGNC Investment thinking you would be able to collect a reliable income stream. But it does make the REIT look much better as an investment, assuming you accept that its goals are a little different (total return) than what you may have been expecting (paying dividends).

Should you buy AGNC Investment right now?

At the end of the day, AGNC Investment is a difficult stock to understand and one that, frankly, most dividend investors will probably be better off avoiding. However, if you know what you are buying or use an asset allocation model, it might be a good fit. Given the nature of its business model, which is very similar to that of a mutual fund, now would be just as good a time to buy as any -- but only if you are willing to do your homework on such a complicated investment.