Should You Buy AGNC Investment While It's Below $10?

Wall Street is an interesting place, with investors often willing to pay far more for a company than fundamentals suggest it's worth. With most companies, the value of the business is a bit subjective. That's not the case with AGNC Investment (NASDAQ: AGNC). That's why, with the stock trading around $10 a share, the company has been selling new shares at a rapid clip. Here's why you might want to hold off buying until the stock is well below $10.

What does AGNC Investment do?

AGNC Investment is a mortgage real estate investment trust (REIT). This is a niche of the overall REIT sector, and it's a fairly complicated one. Unlike a property-owning REIT, which simply buys a building and rents it out, AGNC Investment buys mortgages that have been pooled together into bond-like securities. You could buy a rental property like a traditional REIT, but you probably couldn't do what AGNC does.

Image source: Getty Images.

AGNC Investment's goal is to earn more in interest from the mortgage securities it buys than it costs to manage its business. Notably, like most mREITs, it uses leverage in an effort to enhance returns. So there are really two costs of note on the income statement: General operating costs and interest expense. However, the real story here is about how the business is operated.

Essentially, AGNC Investment is building a portfolio of mortgage securities. It's kind of like a mutual fund in that regard. For example, the value of AGNC Investment is, effectively, the value of its mortgage securities portfolio. That's akin to a mutual fund's net asset value (NAV). AGNC Investment actually reports what it calls tangible net book value each and every quarter.

AGNC Investment will happily sell you shares at $10 each

At the end of the third quarter of 2025, AGNC Investment's tangible net book value per share was $8.28, up $0.47 from the end of the second quarter. That's great news, but there's a small problem. The price of the stock is currently slightly above $10 per share. If you buy AGNC Investment today, you are paying more than what the company is telling you it's worth.

No wonder the mREIT sold 31 million shares in Q3, raising roughly $309 million. When investors buy shares for more than tangible net book value, they are, effectively, giving free money to the company and its current shareholders. If that doesn't sound like a great investment decision to you, then you'll probably want to wait to buy AGNC Investment until it falls below (or at least close to) the last reported tangible net book value per share. Or, maybe, you should just not buy the stock at all.

AGNC data by YCharts.

Most investors look at AGNC Investment's huge 14% dividend yield and view it as an income stock. But the company is pretty clear that it should be viewed with a total return perspective, which assumes that dividends get reinvested. As the chart above highlights, the company has lived up to its total return objective. But if you'd spent the dividend, you would have ended up with less income and less capital.

Paying more than the tangible net book value per share for AGNC Investment will make it even harder to achieve positive total returns. So forget $10 -- think something closer to $8.28, and don't go in expecting the dividend to be reliable. That just isn't what the dividend history here suggests is likely.

AGNC Investment is good at what it does

None of this is meant to disparage AGNC Investment. It actually does a pretty good job of achieving what it sets out to do, that includes selling stock for more than tangible net book value per share. The real point here is that investors need to make sure they understand what they are buying. Sometimes, a huge dividend yield can lead dividend investors to make decisions that aren't actually well-aligned with their long-term goals.

Tread carefully with AGNC Investment. If you do buy it, try not to overpay for the stock, since the company tells you what it's worth every quarter.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.