If You Invest $10,000 in AGNC Investment Today, Here's the Monthly Passive Income You Could Have in 20 Years

AGNC Investment (NASDAQ: AGNC) pays an eye-popping monthly dividend. The real estate investment trust (REIT) currently yields 13.6%. That's well over 10 times the S&P 500's dividend yield (1.1%). At that rate, the dividend income adds up real fast.

Here's a look at how much passive income you could collect each month from a $10,000 investment in the mortgage REIT in 20 years.

Image source: The Motley Fool.

Reinvestment makes a massive difference

At its current yield, a $10,000 investment in AGNC Investment would generate about $113.33 in dividend income each month ($1,360 annualized). The mortgage REIT has maintained its rate for 75 consecutive months. That's impressive considering all the volatility in the mortgage market over the years.

If the REIT continues to pay a static dividend, an investor would collect that same monthly income stream for the next two decades if they didn't reinvest their dividends. However, things get really interesting when reinvesting dividends because it compounds the income stream. Here's a look at the growth in monthly income from dividend reinvestment (assuming a 13.6% reinvestment yield, which is near its five-year historical average of 13.8%):

Chart by the author.

That's a lot of dividend income! The dividend income stream would grow from the current rate of $113.33 a month to $1,675.33 per month in about 20 years. That's 15 times the current income stream, even though we're not assuming any dividend growth from AGNC Investment.

However, there are some big caveats. While it doesn't factor in any dividend growth, this also assumes the REIT doesn't cut its payout. That might be a stretch. Even though AGNC has maintained its dividend for 75 consecutive quarters, it had cut its payment several times before starting that streak. This calculation also assumes monthly reinvestment at around the current yield. The REIT's dividend yield has fluctuated widely (from a low of 7.5% to a peak above 20% over the past decade).

Those caveats aside, AGNC Investment has tremendous long-term income potential from dividend reinvestment alone. That makes it a compelling option for investors seeking to steadily build a meaningful monthly income stream.

Matt DiLallo 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.