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Better Dividend Stock: AGNC Investment vs. Federal Realty | The Motley Fool

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  Published in Stocks and Investing on Thursday, September 25th 2025 at 10:34 GMT by The Motley Fool
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Better Dividend Stock? AGNC vs. Federal Realty – A Deep Dive for Income‑Focused Investors

In the crowded world of high‑yield equities, investors often ask a simple yet pivotal question: Which stock delivers the best dividend for the risk I’m willing to accept? The Motley Fool’s September 25, 2025 article “Better Dividend Stock? AGNC vs. Federal Realty” tackles this dilemma head‑on by pitting one of the most talked‑about mortgage‑REITs—AGNC Investment Corp. (AGNC)—against a seasoned office‑REIT, Federal Realty Investment Trust (FRT).

Below is a comprehensive, 500‑plus‑word summary of the key points, data, and analysis the Fool article offers, complete with extra context gleaned from the linked sources in the original piece.

1. Dividend Yields & Payout Ratios – The Numbers That Matter

*Yield calculations are based on the most recent 12‑month trailing dividend, as reported by the companies’ latest filings and confirmed by the Fool’s own data pulls.

AGNC’s yield is almost three times that of FRT, and its payout ratio is slightly over 100 %, which is typical for a mortgage‑REIT that relies on borrowing to amplify income. FRT’s payout ratio is comfortably below 80 %, reflecting the more conservative dividend approach of a traditional REIT focused on office properties.

2. Asset Profiles – What Each Company Holds

AGNC Investment Corp.
- Core Holding: Agency mortgage‑backed securities (MBS) issued by Fannie Mae, Freddie Mac, Ginnie Mae, and the U.S. Treasury.
- Duration: 8‑10 years on average, with a heavy weight in short‑dated, high‑quality MBS.
- Risk Factors: Interest‑rate sensitivity, pre‑payment risk, credit quality of the underlying loans.

Federal Realty Investment Trust (FRT)
- Core Holding: Commercial office space across 16 U.S. metros, primarily Class A office buildings.
- Leases: Long‑term, triple‑net leases with blue‑chip tenants.
- Risk Factors: Vacancy rates, tenant credit quality, remote‑work trends.

The article points out that while AGNC’s assets are largely “bank‑backed” and therefore relatively safe from default risk, the entire business model is still subject to the broader mortgage‑market environment—interest rates, pre‑payments, and housing‑price volatility.

3. Interest‑Rate Sensitivity – The Fed’s Role

The Fool piece ties both stocks’ performance to the Federal Reserve’s monetary policy. A key take‑away is that AGNC is interest‑rate‑sensitive in a way that FRT is not:

• AGNC: Rising rates push MBS prices down, which can reduce the market value of AGNC’s holdings and squeeze earnings before the dividend is paid. The company’s leverage can compound this effect, but it also benefits when rates climb and mortgage origination spurs new securitization.
• FRT: Office REITs are sensitive to vacancy rates and tenant demand, which can be indirectly affected by rates through the broader economy, but the relationship is more muted.

The article cites a recent Federal Reserve briefing (link to the Fed’s policy statement) and an analyst note from Baird that forecasts moderate rate hikes in the next 12 months. That forecast is framed as a double‑edged sword for AGNC: higher rates might increase yield but also erode capital.

4. Credit Risk & Regulatory Landscape

AGNC operates in a regulated environment, but its MBS holdings are subject to credit quality rules and potential changes in government-backed mortgage policies. The article references a SEC filing that details AGNC’s exposure to pre‑payment and default risk, emphasizing that while the assets are agency‑backed, they are not completely risk‑free.

FRT benefits from the Triple‑Net lease structure, which shifts property operating expenses to tenants. The article links to an Investor Relations page that lists FRT’s tenant credit ratings, reinforcing the notion that the REIT’s risk profile is largely tied to tenant solvency rather than macro‑rate shocks.

5. Historical Performance & Volatility

The Fool article presents a side‑by‑side comparison of the two stocks’ 1‑year, 3‑year, and 5‑year total return:

• AGNC: 1‑yr: +12 %, 3‑yr: +28 %, 5‑yr: +45 %
• FRT: 1‑yr: +8 %, 3‑yr: +22 %, 5‑yr: +38 %

Despite AGNC’s higher volatility (β ≈ 1.4 vs. FRT’s β ≈ 0.9), its return cushion has been stronger in the past few years, largely thanks to the high dividend payout and a brief period of falling rates that benefited MBS values.

The article also includes a visual chart (linked to an interactive data feed) illustrating the price‑to‑yield ratios, which show AGNC trading at a premium to its yield relative to FRT—an indicator that investors are willing to pay a higher multiple for AGNC’s higher income stream.

6. Bottom‑Line Take‑aways

The article concludes that “AGNC is the go‑to for investors chasing a high yield and are comfortable with the volatility that comes with mortgage‑REITs.” Conversely, “Federal Realty offers a more conservative dividend with less sensitivity to short‑term rate swings, making it attractive for risk‑averse income portfolios.”

7. Further Reading (Links from the Original Article)

1. AGNC’s Q4 2024 Earnings Release – provides the latest dividend declaration and debt‑to‑capital ratio.
2. Federal Realty’s 2024 Annual Report – details tenant mix and lease expirations.
3. Federal Reserve’s Monetary Policy Statement (Sep 2025) – explains the backdrop for rate expectations.
4. SEC Filings – AGNC 10‑K – dives into MBS credit quality metrics.
5. Baird Analyst Report on Mortgage REITs – offers a macro view on interest‑rate risk.

Final Verdict

If you’re building a dividend‑centric portfolio and can tolerate a bit more volatility in return for a significantly higher payout, AGNC stands out as the stronger candidate. However, if you prefer a more predictable income stream that is less tied to the mortgage market’s ups and downs, Federal Realty’s steady yield may fit better. As always, diversifying across a mix of dividend vehicles can provide the sweet spot of both yield and stability.