AGNC Has a New $1 Billion Buyback. It Only Kicks In If the Stock Falls to Book Value.

AGNC (NASDAQ: AGNC), the world's second-largest mortgage real estate investment trust (mREIT), pays a massive forward dividend yield of 16.4%. But over the past five years, AGNC's stock has declined 45%, reducing its total return to just 11%. During the same period, the S&P 500 (SNPINDEX: ^GSPC) delivered a total return of 70%.

AGNC struggled as the Fed's 11 consecutive rate hikes in 2022 and 2023 reduced the value of its existing mortgage-backed securities (MBS) while increasing its short-term borrowing costs for purchasing new MBS. Its business gradually stabilized in 2024 and 2025, but the Fed's rate hike this September -- its first in three years -- squeezed AGNC's profits again.

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During its third-quarter report in October, AGNC sought to appease its investors by replacing its existing $1 billion buyback plan (authorized in Oct. 2024) with a fresh program of the same amount, extended through Dec. 2028. That's equivalent to 9% of its $11.3 billion market cap.

However, AGNC didn't buy a single share under its previous plan, and it will execute its new plan only if its stock trades at or below its tangible book value. Let's see how closely AGNC aligns with those conditions and whether its investors will actually benefit from a large buyback.

AGNC's book value could be bottoming out

From 2021 to 2025, AGNC's book value per share fell from $15.75 to $8.88, and sank to $7.13 per share in the third quarter of 2026. As of this writing, its stock trades at just under $9, well above the threshold required to execute its new buyback plans.

During AGNC's third-quarter conference call, CFO Bernie Bell said its book value had already recovered by 2% to 3% in early October as its mortgage spreads stabilized following the late-September sell-off. Therefore, its book value could rise again before any buybacks kick in.

At the same time, AGNC will continue to issue new shares through its at-the-market (ATM) equity program as long as its stock trades at a premium to its book value. Selling more shares above its book value generates extra cash per share, which boosts its book value per share.

That structure suggests buybacks aren't particularly meaningful for AGNC, which has increased its share count by 142% over the past five years. That isn't surprising, since REITs are designed to constantly issue more shares to fund their long-term growth. While AGNC's new buyback plan might limit its downside in a market crash, it doesn't matter as much as its net spread and dollar roll income per share -- which actually covers its massive dividends.

Leo Sun 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.