High Dividend REIT Showdown: Why AGNC's 14% Yield Might Be a Trap

AGNC Investment (AGNC) is flashing a tempting 14% dividend yield—10x higher than the S&P 500. But here’s the catch: this mortgage REIT has cut dividends multiple times since 2014 (from $0.22 to $0.12 per share), and it’s heavily leveraged betting on a single asset class (Agency mortgage-backed securities).

Enter Starwood Property Trust (STWD), yielding nearly 11%—and here’s what matters: it’s maintained the same dividend rate for over a decade without a single cut.

The Key Difference

AGNC’s strategy: All-in on Agency MBS with leverage. High returns when rates are stable, but vulnerable when conditions shift. The REIT earned 17% ROE last quarter, barely covering its cost of capital—not much room for error.

Starwood’s approach: Diversified across commercial real estate loans (53%), residential loans (9%), infrastructure backing (10%), and direct property equity (19%). Just acquired Fundamental Income Properties for $2.2B, adding stable net lease properties with 2.2% annual lease escalation.

The Numbers That Matter

Starwood deployed $4.6B in Q3, including record $800M into infrastructure lending—showing management’s flexibility to chase opportunity. AGNC? Stuck investing in whatever Agency MBS the market offers.

For income-first investors: AGNC’s high yield is sexy but fragile. Starwood’s lower yield is boring but built to last. One dividend cut wipes out years of extra income gains.