AGNC pays a high-yielding monthly dividend.
The mortgage REIT can generate income to help cover your monthly mortgage payment.
This strategy isn’t without risks.
AGNC Investment (NASDAQ:AGNC) invests in residential mortgages. The interest income from those investments covers its 15%-yielding monthly dividend ($0.12 each month). At that rate, you’d need to accumulate 17,783 shares — a $170,717 investment at its recent $9.60 share price — to cover the average monthly mortgage payment of $2,134 (according to Bankrate).
Here’s how to figure out how many shares you’d need to own of the mortgage REIT to cover your mortgage payment, and some risks to consider before accumulating shares.
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The formula for reaching a specific dividend income goal is simple. You divide the desired amount by the investment’s current income to determine the number of shares, then multiply that by the current price to get the total investment requirement.
Using our example, we’d divided $2,134 (the monthly mortgage payment) by $0.12 (AGNC’s monthly dividend payment), which equals 17,783 shares. Multiply those shares by AGNC’s current price ($9.60), and we get the total investment requirement of $170,717. To determine what you’d need to cover your mortgage, just plug that number in and use AGNC’s current share price when you run the calculation to determine what you’d need to invest.
Now, the caveats. Most of us don’t have over $170,000 lying around; otherwise, we’d probably pay down our mortgages by that amount to lower our monthly payment. Further, there are tax implications to consider, as you’d pay taxes on the income received from AGNC, meaning you’d need to invest even more to cover the taxes. Finally, while AGNC has maintained its monthly dividend since early 2020, the REIT has cut its payment several times in the past. So, you can’t really bank on receiving the same income each month for the life of your mortgage. It would also be unwise to allocate a significant portion of your available funds into any investment, let alone one as risky as AGNC. Still, it’s a fun exercise, and you can build a more diversified portfolio that includes AGNC to generate income to cover some of your mortgage payments.
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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.
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