Is AGNC Investment (AGNC) Still Cheap Following Its 75 Month Dividend Run?

Recent commentary on AGNC Investment (AGNC) has focused on its ability to keep paying a high monthly dividend, with the company having held its current payout for 75 consecutive months.

See our latest analysis for AGNC Investment.

At a share price of $10.84, AGNC Investment has seen short term share price momentum cool slightly, with the 1 month share price return down 2.61%. Yet the 1 year total shareholder return of 33.20% and 3 year total shareholder return of 74.07% indicate that longer term holders have still seen a combination of income and price performance.

If AGNC Investment’s recent moves have you thinking about where else income and price momentum might be lining up, it could be worth scanning for 19 top founder-led companies

AGNC Investment now offers a double digit yield and has a strong track record of paying it. However, the recent cooling in short term momentum raises a key issue: Does the current price still compensate you enough for the risks you are taking?

Price-to-Earnings of 6.1x: Is it justified?

AGNC Investment currently trades on a P/E of 6.1x, which screens as good value compared both to its peers and to the US Mortgage REITs sector average.

The P/E ratio compares the company’s share price with its earnings per share. For a mortgage REIT like AGNC Investment, it gives a quick read on how the market is pricing each dollar of earnings, alongside the high dividend yield that many investors focus on.

AGNC Investment is described as good value on this measure compared with the peer average P/E of 14.7x and the US Mortgage REITs industry average of 8.9x. It also trades below an estimated fair P/E of 10.8x, which indicates the current multiple is well under the level the market could move towards if conditions align.

Explore the SWS fair ratio for AGNC Investment

Result: Price-to-Earnings of 6.1x (UNDERVALUED)

However, AGNC Investment’s revenue and net income both declined over the past year, and any further pressure on earnings or dividends could quickly challenge today’s valuation story.

Find out about the key risks to this AGNC Investment narrative.

Another view on AGNC Investment’s valuation

The P/E of 6.1x suggests AGNC Investment trades cheaply, yet the SWS DCF model points to a fair value of $18.76 per share, which is well above the current $10.84 price. That gap signals a potential mispricing, or it could reflect real concerns about future earnings and cash flows.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out AGNC Investment for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 52 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Given the mixed signals around AGNC Investment, it makes sense to check the underlying data yourself and decide how comfortable you feel with the balance of risks and potential rewards. To weigh both sides in one place, take a closer look at the 3 key rewards and 3 important warning signs.

Looking for more investment ideas beyond AGNC Investment?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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