AGNC Vs STWD: Which mREIT Has Stronger Income Potential?

By Riya Anand | May 26, 2025, 11:15 AM

AGNC Investment Corp. AGNC and Starwood Property Trust, Inc. STWD are two of the known names within the mortgage real estate investment trusts (mREITs) industry. Both offer favorable long-term stockholder returns and a massive dividend yield.

But which one offers the better opportunity for investors right now? Let us break down the strengths, risks and growth potential of AGNC and STWD.

The Case for AGNC

AGNC Investment adheres to an active portfolio-management policy, which includes re-evaluation and adjustment of its portfolio, as well as hedges amid a varying interest rate and mortgage market environment. The company is operating in a more defensive position with significant hedge protection due to market volatility.

Over the recent quarters, the company has made pronounced efforts to reposition its portfolio to offset risks related to interest rates and prepayment uncertainty. As of March 31, 2025, the company maintained a significant interest rate hedge position, which covered 91% of the outstanding balance of its Investment Securities Repo, TBA position and other debt. Such prudent asset-selection efforts may offer greater stability of cash flows and bode well for long-term growth.

The Government-sponsored enterprise guarantee for the principal and interest payments makes Agency mortgage-backed securities MBS a safer investment choice. Spread widening and mortgage market volatility affected existing Agency MBS investments’ performances. Nonetheless, the long-term investment outlook for the company’s new Agency MBS is favorable.
Hence, with $77.9 billion of Agency MBS in its investment portfolio (as of March 31, 2025), AGNC Investment is expected to enjoy attractive risk-adjusted returns within the fixed-income markets.

The company enjoys a decent financial position. It has solid access to attractive funding across a broad spectrum of counterparties and financing conditions. As a result, it has flexibility in the opportunistic enhancement of its portfolio. As of March 31, 2025, AGNC Investment’s liquidity, including unencumbered cash and Agency MBS, was $6 billion. The company’s leverage increased modestly to 7.5X at the end of the first quarter (from 7.2X in the prior quarter). It has a long-term debt of $62 million as of the same date.

The Case for STWD

Starwood Property is a leader in investing in commercial mortgage-backed securities (CMBS) and related commercial real estate assets, with a diversified portfolio of $1.02 billion as of March 31, 2025. This allows it to generate stable income streams while capitalizing on market opportunities. The company’s asset management expertise and ability to navigate the complexities of the CMBS market contribute to its strong market position and growth potential moving forward.

Starwood Property has been actively engaged in acquisitions and divestitures to optimize its portfolio. In February 2024, the company sold 16 retail properties in its Master Lease Portfolio for $387.1 million, recognizing a gain of $92 million. Additionally in 2024, it sold an operating property within its Real Estate Investment and Services Equity Portfolio for $18.2 million, with an increase of $8.3 million, reflecting continued portfolio optimization.

Also, the same year, the company also sold residential units in a New York conversion project, totaling $12.1 million in proceeds, though with no gain or loss recognized. Meanwhile, there were no significant acquisitions recently, aside from properties acquired through loan foreclosure. This strategy of selective sales and reinvestments supports the company's ongoing focus on enhancing its portfolio.

However, Starwood Property’s weak liquidity position is concerning. As of March 31, 2025, the company had cash and cash equivalents of $692 million. Its long-term debt was $18.4 billion. This is likely to be concerning if the macroeconomic situation worsens.

AGNC & STWD: Price Performance, Valuation & Other Comparisons

In the past year, shares of STWD and AGNC have risen 13.6% and 6.3%, respectively, compared with the industry’s growth of 1.9%.