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High dividend yields can be incredibly tempting for income-seeking investors, but it’s important to remember that high yields almost always come with high risk. One such example is AGNC Investment Corp (NASDAQ:AGNC), a real estate investment trust (REIT) that provides private capital to the U.S. housing market. While AGNC’s forward dividend yield of 15.09% may seem attractive at first glance, a closer look at the company’s historical performance and analyst ratings suggests that investors should approach with caution.
AGNC Investment Corp invests primarily in residential mortgage-backed securities and collateralized mortgage obligations. Despite its high dividend yield, AGNC’s stock price has declined by 45.57% over the past five years, and the company has seen negative growth in both revenue and earnings per share over the past three years. It’s dividend has also been going in the wrong direction, with a 5-year growth rate of -7.79%.
Furthermore, analysts have a consensus price target of $8.66 for AGNC, with the last three ratings from Keefe, Bruyette & Woods, JonesTrading and JMP Securities implying a 30.92% downside from the current price.
A High-Yield Alternative: VanEck BDC Income ETF (BIZD)
Investors who are willing to take on higher risk in pursuit of high yields may find a better balance with the VanEck BDC Income ETF (NYSE:BIZD). This exchange-traded fund seeks to replicate the performance of the MVIS US Business Development Companies Index, which tracks the overall performance of publicly traded business development companies (BDCs).
BDCs are unique investment vehicles that provide financing to small and mid-sized private companies, which often have limited access to traditional funding sources. By investing in BDCs, the VanEck BDC Income ETF offers exposure to a diversified portfolio of private debt and equity investments, potentially generating high yields for investors.
As of May 2024, BIZD has a trailing 12-month dividend yield of 10.53%, with a four-year average yield of 10.07%. The ETF has also delivered impressive total returns, with a five-year average annual total return of 11.11%. The fund’s top holdings include well-known BDCs such as Ares Capital Corp (ARCC), Blue Owl Capital Corp (OBDC) and FS KKR Capital Corp (FSK).
Diversifying With Private Funds
The Cityfunds Yield fund presents an intriguing alternative for income investors interested in diversifying beyond traditional stocks and ETFs. This fund targets an 8% annual percentage yield (APY) and provides investors with stable cash flow backed by real estate assets.
The Cityfunds Yield fund invests in a diversified pool of collateralized real estate loans, including home equity-backed notes and short-term mortgage notes. By targeting a mix of asset types and geographies, the fund aims to generate consistent income for investors while mitigating risk.
Investors in the Cityfunds Yield fund receive quarterly distributions, which can be reinvested to compound returns or paid out directly to their bank accounts. The fund also has a guaranteed floor of 7%, providing consistency for income portfolios. Click here to learn more about Cityfunds Yield.
This article Tempted By AGNC’s 15% Dividend? You May Have Better Luck With This High-Yield ETF originally appeared on Benzinga.com
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