Once again. I bought AGNC shares. Total price was $100k. They pay divs to me for 6 years. I covered my original expenses and put it to money market. Now it cost me ZERO and pays divs. It pays $1.44 p/y, my AGNC average stock price $8.31. 1.44/8.31 =0.173. 17.3%. And it’s NOT RISK FREE, I made it risk free !
Folks, Suppose you invest your $100K or $10K and made it double in day/week/month/year. So you have $100K gain. Now, do you want this money will be your additional monthly salary to you ? First of all it’s money you gain. So for your original $100K risk to loose =0. You are looking how to invest your $100k gain money and have good monthly payments. It should be high yield but stable company. In my case it was AGNC (divs did not changed for six years). If you will buy AGNC for $9. Divs $1.44/$9 =0.16 , 16% ($16K) will be paid to you. $1333 every month. If you know better stable company with high yield, please let me know. The whole idea to get your money you spent, back to you, and use money you gained to pay monthly dividends to you.
you have a phd in statistics but don't seem to understand how these things work. The price changes reflect the future value of the interest payments. Because these are levered, the future value of interest paymeents are a function of their financing costs (overnight rate) and prepayment risk (long term rate). As financing costs change (which are real) the company makes or loses money and that affects the present value of the whole scheme. This is why the stock doesn't rally to "arb out the high dividend yield." Wall Street isn't stupid. If this dividend was truly stable, the price of the asset would be stable or increased too the point that the dividend would = the risk free rate. Instead the asset trades at a price to book of 1.13 (probably a slight premium because retail investors like you bid it up) For an example, look at CUBE (self storage business). It's return on assets is 6% vs AGNC's ROA of 1%. Cube trades at 3x book value while AGNC trades at 1x book value. Cube's div yield is 5% as a result but vs book value the div yield would be 15% like AGNC. Both are REITs but CUBE owns real properties with modest debt at an LTV of 50% while AGNC has an LTV of 90%. This is why AGNC stock value keeps shrinking. It's a speculation on duration with a giant management fee as a drag masked as an income generating vehicle. You can do the same speculation yourself with some sofr futures. CUBE is a real REIT business. They run self storage units. You can't do that yourself and there's virtually no duration risk. Customers pay monthly, and whatever little debt CUBE has is also paid monthly and held to maturity. As a result Wall Street has bid CUBE stock well above it's book value (and brought the div yield down proportionally). So what's your view on interest rate yield curve and pre-payments? What's your PHD and your ninja turtle telling you?
I got your point. I know that high dividends will have high risk too. However, regression analysis about company past shows something too. I invested my money for six years to this company and achieved good results. Do you know how many times and how many my advanced friend were telling me. It not gonna work, forget about it, you gonna loose your money. If it worked for me, it will work for people too. Do you know, how they make you to loose your money ? When you quit for short period. If you keep following your strategy - you will win. My ninja tells us “if you green - you win” I will check CUBE. I was looking this company a wile ago, but it did not convince me. I’ll double check. BTW thank you for criticism.
There is no risk free 17% or even 3% in the market. Anything above the SPY yield means you are taking risk. You may not see it or it hasn't happened. I used own a lot of mREITs & MLPs as a yield play but I owned them long enough to know they do indeed have a lot of risk. Sure right now with the Fed is supposedly on a rate lowering path so these mREITs will do well but if it ever changes then you will see huge losses and lowered dividends. I believe in 2023 Q3 the rates shot up a lot & the mREITs were down 20+%. It could happen again if Trump pulls some crazy shenanigans. As long as the economy doesn't go into a severe recession, a better credit play for total return is buying these private credit companies fka BDCs. MAIN & TSLX have done pretty well since the SVB collapse. There are some good CEFs as well like FSCO.
I bought SPY when SPX went in 10% correction at $549 and later I bought it even below and sold it for $600 (my mistake )
if you aren't doing 3% in this market you are a failure. The 1Y t-bill is yielding 3.7 right now. +1 on BDCs. Real portfolios with real credit risk, but diversified.
annual return of AGNC over the last 6 years is 3% assuming you reinvested and didn't pay taxes on all those distributions. If you pad taxes on those distributions, i bet you are in the hole as the price return was -44% and so you paid taxese on like 55% of your notional. A PHD in math can figure out this impact. This is a terrible investment. In the mean time the SPX is up 50%.