Why AGNC Investments’ Net Interest Spread Matters More Than Its 14% Dividend Yield

AGNC (AGNC 0.54%)one of the largest mortgage real estate investment trust (mREITs) in the US, pays a forward dividend yield of 14.1%. That huge dividend often gets a lot of attention based on income Investors, but is it a stable long-term investment? Let’s review its net interest spread and why this metric matters more than its dividend yield.

How does AGNC make money?

As an MREIT, AGNC purchases only mortgages and mortgage-backed securities (MBS). To reduce its risk, AGNC allocates 89% of its $94.7 billion portfolio to agency MBS assets, which are backed by Fannie Mae, Freddie Mac or Ginnie Mae. That government support should protect it from another housing market downturn.

AGNCs collect interest on those investments and distribute at least 90% of their taxable income as dividends to maintain a low tax rate. To generate more cash for future MBS purchases, it sells its own MBS to counterparties and agrees to repurchase them at a set price and interest at a future date. Those counterparties hold the MBS as collateral, but the accrued interest is still paid back to AGNC. The company refers to these sales as “repo transactions.”

To implement this strategy, AGNC must earn enough interest from its long-term MBS to cover its purchases of short-term MBS. In other words, the Fed’s short-term rates should remain lower than its long-term rates. If the yield curve inverts (short-term yields exceed long-term yields) when the economy is in trouble, its net interest spread – or the difference between the average yield earned by AGNCs on its MBS and the average cost of financing those purchases – will decline.

today’s change

(-0.54%) $-0.06

current price

$10.21

key data points

market cap

$12B

day limit

$10.19 -$10.34

52wk range

$8.79 -$12.19

volume

358.3K

average volume

18.2m

gross margin

100.00%

dividend yield

14.10%

What happened to AGNC in the last few years?

AGNC recorded a net interest spread of 1.92% in 2025, compared to 2.42% in 2024 and 3.06% in 2023. Its spreads declined as its funding costs outstripped its asset yields, largely because it was still locked into the old rates of its legacy repo transactions.

But as the low-rate hedges “roll off”, it may replace them with more profitable hedges. That’s why its net interest spread stagnated over the last year.

Data source: AGNC.

For 2026, analysts expect stabilizing yield to increase its EPS 5% to $1.57, which would easily cover its forward yield of $1.44 per share. So even though AGNC may initially seem like a high-yield trap, its dividends are actually sustainable, and its core business is improving. Therefore, it is still a reliable investment for income-oriented investors.