A 100% Chance of a Dividend Cut

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When's the Next Dividend Cut for This 12.8% Yielder?

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

Mortgage real estate investment trust AGNC Investment Corp. (Nasdaq: AGNC) is one of the most requested stocks in the Safety Net column because of its double-digit yield. Since it's so popular, I make sure to review it at least once a year.

Last year, the stock received a "D" rating for dividend safety. At that time, the yield was below double digits. But because the price of the stock fell significantly over the past year (as did the prices of many other stocks), the yield is now 12.8%.

The good news is that net interest income (NII) took off in 2021 and has more or less stayed constant since then.

NII rose from $845 million in 2020 to $1.3 billion in 2021. For 2022, NII is projected to come in at $1.5 billion when the company reports full-year results. However, Wall Street forecasts a slight dip to $1.3 billion in 2023.

Considering that AGNC is expected to pay $855 million in dividends, that's not a big deal. Though Safety Net does penalize companies for declining cash flow or, in this case, NII. If estimates for 2023 rise to more than $1.5 billion, the stock will get an upgrade from Safety Net.

Because NII is considerably higher than the expected dividend, there doesn't appear to be imminent danger of a cut. However, AGNC has a sordid history when it comes to its dividend.


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The company began paying dividends in 2008. Since then, it has steadily lowered the dividend since 2009, reducing it eight times to its current $0.12 per share monthly.

Chart: AGNC Is a Serial Dividend Cutter Source: Bloomberg

While AGNC can afford its dividend today, it has shown over and over that when the going gets tough, management slashes the dividend.

Investors can probably bank on the dividend this year as long as NII comes in near where it's expected. But rest assured, the next big downturn in NII will be accompanied by yet another dividend cut.

Dividend Safety Rating: F

Dividend Grade Guide

If you have a stock whose dividend safety you'd like me to analyze, leave the ticker symbol in the comments section.

And be sure to check to see whether I've written about your favorite dividend stock recently. Just click on "Search" at the top right part of the page, type in the company name and hit enter.

Good investing,


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