Could AGNC Investment Corporation (NASDAQ: AGNC) Cut its Dividend?
Today is Friday, March 20, 2020, and this is your daily dividend safety update. Today we’re looking at AGNC Investment Corporation (NASDAQ: AGNC) stock to see whether its 19.35% dividend is safe.
High-yield dividend stocks can be very useful to investors of all ages. Younger investors can use dividend reinvestment plans (DRIPs) to grow their portfolios exponentially over time, while retirees can use them to generate passive income.
In both cases, it’s preferable to buy dividend stocks with steady or rising dividends – and avoid those that cut their dividends.
Let’s look at the payout ratio, cash flow growth, and dividend history of AGNC Investment Corporation to gauge the probability of a dividend cut in the next few years.
Payout Ratio (Dividends/Earnings)
AGNC Investment Corporation has a payout ratio of 165.6%. That’s too high for our liking. Payout ratio equals dividends per share divided by earnings per share. Payout ratios near or over 100% indicate that the company might not be able to afford its dividend — or that it might have to borrow money to pay it.
Cash Flow Growth Year-Over-Year
AGNC Investment Corporation has grown its cash flow by 36.63% in the last year. That’s a good omen for dividend investors! When a company grows its cash flow, it can use some of that extra cash to strengthen — or even raise — its dividend.
Dividend History & Recent Cuts
AGNC Investment Corporation has a recent history of dividend cuts. In fact, it’s only been 1 year since the last cut. That’s not a good sign. Companies that have recently cut their dividend are generally more likely to cut them again.
AGNC Investment Corporation stock has failed 2 of our 3 dividend safety metrics. With that in mind, we believe a dividend cut is likely in the next few years.
Editor’s Note: We’ve been keeping an eye on some dividend stocks that could be better for your income portfolio than AGNC Investment Corporation. These dividends are much bigger — and safer — than the paltry yields many investors settle for. Enter your email below to learn more.
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