Better Dividend Stock: AGNC Investment vs. Federal Realty

Key Points

• AGNC Investment has a massive 14%+ dividend yield.

• Federal Realty's dividend yield is "only" 4.5%.

• Despite a lower yield, Federal Realty is likely to be a better investment choice for most long-term dividend investors.

• 10 stocks we like better than AGNC Investment Corp. ›

It is tempting to reach for yield if you are a dividend investor. I know, I've done it. And I've ended up sorry for making the decision more times than I care to admit. Which is why I own Federal Realty Investment Trust (NYSE: FRT) and not AGNC Investment (NASDAQ: AGNC), despite the fact that the latter's dividend yield is over three times larger! Here's why it is so important to know what you want when you are looking at ultra-high-yield dividend stocks like AGNC Investment.

What does AGNC Investment do?

From a high-level view, AGNC Investment is a real estate investment trust (REIT). REITs are designed to pass income on to investors and generally have large dividend yields. I like REITs a lot and own a few of them. That said, AGNC Investment isn't any old REIT. It is a mortgage REIT, which is a specialized niche in the broader REIT sector.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Image source: Getty Images.

Mortgage REITs (mREITs) are relatively complex investments compared to property-owning REITs. While you would do the same basic thing as a property-owning REIT if you invested in a rental property, mortgage REITs like AGNC Investment own portfolios of securities that have been created by pooling together mortgages. It is likely that you couldn't do the same thing as this REIT, which is best looked at as being similar to a mutual fund.

The complexity is one issue, which I could get over in time. But the real problem is that AGNC Investment's priorities as an mREIT are different from mine as a dividend investor. Take a look at the chart below. Total return has been strong, but that assumes dividend reinvestment. The dividend, meanwhile, has been highly volatile and the stock price has basically tracked along with the dividend over time. The most recent trend for both is down.

AGNC data by YCharts

Why I prefer Federal Realty

There's nothing wrong with AGNC Investment. In fact, it does a pretty solid job of creating value for investors over time, assuming you reinvest dividends. It's just that the value being created is in the form of total return, not a reliable income stream. I'm not looking for stocks which require me to dividend reinvest to achieve strong returns. I want to own stocks that have reliable and growing dividends that I can use to pay for living expenses when I retire. A growing business, which will likely lead to a slowly rising stock price over time, is a secondary positive. That's what Federal Realty provides me.

Federal Realty is a strip mall and mixed-use development landlord. It has long focused on quality over quantity, looking to own a small number (around 100) of properties in highly attractive regions (its properties are industry-leading assets). This model has worked out very well for dividend investors like me who prize dividend consistency. Federal Realty has the longest dividend streak of any REIT, with over five decades of annual increases. It is the only REIT that has achieved Dividend King status.

I could go into the fine details, but it really isn't necessary to get the point across here. AGNC Investment has a history of cutting its dividend. Federal Realty has a history of raising it. If you are trying to live off of your dividend income, Federal Realty will be a better choice. That's true even though AGNC Investment's dividend yield is over 14% while Federal Realty's yield is a much lower 4.5%. In the end, a massive yield that you can't count on isn't going to help you create a retirement budget.

AGNC Investment is a fine mREIT

There's nothing wrong with investing for total return. And AGNC Investment could be a valuable part of an asset allocation plan built around total return. But I'm not focused on total return; I'm focused on creating a sustainable and hopefully growing income stream. That makes Dividend King Federal Realty a much better dividend stock than AGNC Investment for me, despite the substantial yield difference.

Should you invest $1,000 in AGNC Investment Corp. right now?

Before you buy stock in AGNC Investment Corp., consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AGNC Investment Corp. wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $670,781!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,023,752!*

Now, it’s worth noting Stock Advisor’s total average return is 1,052% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 25, 2025

Reuben Gregg Brewer has positions in Federal Realty Investment Trust. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.