Should You Forget AGNC and Buy These 2 High-Yield REITs Instead?

AGNC Investment (NASDAQ: AGNC) often attracts a lot of dividend investor attention because of its massive 14% yield. It's a mortgage real estate investment trust (mREIT) that originates its own mortgages and invests in mortgage-backed securities (MBS). It books the interest from those mortgages as its net profit, which it then shares with investors through its big dividends.

To hedge against another housing crisis, AGNC allocates 89.4% of its $73.3 billion portfolio to agency MBS assets, which are backed by Fannie Mae, Freddie Mac, or Ginnie Mae. But in 2024, AGNC's net spread and dollar roll income per share dropped 28% to $1.88 per share as the Fed's three interest rate cuts reduced its profitability.

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That still easily covered its $1.44 in dividends per share for the year, which it paid out on a monthly basis. But for 2025, analysts expect AGNC's net spread and dollar roll income to drop another 15% to $1.60 per share as interest rates keep sliding. That raises some near-term concerns about its massive dividend, even though it looks sustainable for now.

Instead of chasing AGNC's high yield, investors might want to consider buying these two other traditional REITs -- Realty Income (NYSE: O) and Vici Properties (NYSE: VICI) -- which buy and rent out physical properties instead of relying on the mortgage market. Both of these stocks should fare better in a lower interest rate environment than AGNC.

Realty Income

Realty Income is a retail REIT that owns approximately 15,600 real estate properties across the world. Its top tenants include Dollar General, Dollar Tree, Walgreens, and 7-Eleven.

As a retail REIT, it buys properties, rents them out, and splits that rental income with its investors. Some of its tenants struggled with store closures over the past few years, but its occupancy rate has never dropped below 96% since its IPO in 1994. That high rate indicates its stronger tenants can consistently pick up the slack from its weaker tenants.

As a REIT, Realty must pay out at least 90% of its pre-tax profits as dividends to maintain a favorable tax rate. Like AGNC, Realty pays its dividends monthly. It's raised its payout 130 times since its 1994 IPO, and it pays a hefty forward yield of 5.7%.

Realty Income's dividend yield might seem paltry compared to AGNC's. But over the past 10 years, it delivered a total return of 70% (after including its reinvested dividends) and beat AGNC's total return of 57%.

From 2014 to 2024, its adjusted funds from operations (AFFO) per share rose at a steady CAGR of 5%. For 2025, it expects that figure to grow 1%-2% to $4.22-$4.28 per share, which should easily cover its forward annual dividend rate of $3.22 per share. At $56, Realty's stock still looks like a bargain at 13 times this year's AFFO per share.

Vici Properties

Vici is an experiential REIT that owns a portfolio of 93 casino and entertainment properties in the U.S. and Canada. Its top tenants include Caesar's Entertainment, MGM Resorts, Penn Entertainment, and Century Casinos.

Vici has maintained a perfect occupancy rate of 100% ever since its IPO in 2018. It accomplished that by locking its tenants into multi-decade leases, with annual rent increases mostly pinned to the consumer price index (CPI) so its rent keeps pace with inflation.

From 2018 to 2024, Vici grew its AFFO per share at a steady CAGR of 8%, and it's raised its dividend every year since its public debut. For 2025, it expects its AFFO per share to grow 3%-4% to $2.32-$2.35 per share -- which should easily cover its forward annual dividend rate of $1.73 per share. That equals a forward dividend yield of 5.5%.

At $32, its stock still looks like a bargain at 14 times this year's AFFO per share. Vici only pays quarterly dividends, and its yield is much lower than AGNC's. But if you had invested in Vici's IPO on Feb. 1, 2018, you'd be sitting on a total return of 124% today. AGNC only netted a total return of 30% during that same period. Past performance never guarantees future gains, but Vici's simplicity, scale, and stickiness arguably make it a more reliable income play than AGNC.

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Leo Sun has positions in Realty Income and Vici Properties. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Vici Properties. The Motley Fool has a disclosure policy.