Here's How Many Shares of AGNC Investment You Should Own to Get $5,000 in Yearly Dividends

AGNC Investment (NASDAQ: AGNC) has a monster dividend yield. The real estate investment trust's (REIT) payout is currently around 15.5%. That's more than 10 times higher than the S&P 500 (which has a less than 1.5% dividend yield).

Given its much higher dividend yield, you'd need to invest a lot less money to generate $5,000 in dividend income from the mortgage REIT compared to other options.

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AGNC Investment currently pays a monthly dividend of $0.12 per share ($1.44 annualized). The REIT has maintained that payout level for the past five years.

At that payment rate, you'd need to own nearly 3,475 shares of the REIT to generate $5,000 in annual dividend income. At its recent price of around $9.25 a share, you'd need to invest over $32,100 into its stock to acquire that many shares. While that's a lot of money for many beginning investors, it's much less than you'd need to produce $5,000 in dividend income from a different investment. For example, given the S&P 500's much lower rate, you'd need to invest $393,700 into an S&P 500 index fund to generate $5,000 in annual dividend income.

The caveat is that ultra-high-yielding dividend stocks like AGNC Investment tend to have higher risk profiles. While AGNC Investment has managed to maintain its monthly dividend level for the past five years, it has cut its payment several times over the years.

The good news is that the REIT currently earns a high enough return on its investments (mortgage-backed securities protected against default by government agencies) to cover its cost of capital, including its dividend outlay. However, if returns ever got out of alignment with its cost of capital, the REIT might need to reduce its dividend payment again.

Given its higher risk profile, you shouldn't invest in AGNC Investment if you require bankable income to cover your living expenses. You'd probably be better off investing more cash into lower-yielding but more sustainable dividend stocks.

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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.