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AGNC Investment (NASDAQ: AGNC) offers big-time dividend income potential. The real estate investment trust (REIT) pays a monthly dividend currently yielding more than 14%. That’s ten times more dividend income than you could earn by investing in an S&P 500 index fund, given its current yield of less than 1.4%.

The mortgage REIT’s monster monthly dividend likely has many income-seeking investors interested in its stock. However, before you buy that REIT, you should check out Realty Income (NYSE: O) and EPR Properties (NYSE: EPR). They also offer high-yielding monthly dividends. The big difference is that their payouts are more likely to rise in the future, while AGNC Investment could very well cut its dividend again.

Built to pay a durable, and growing, monthly dividend

Realty Income currently yields nearly 6%. While that’s a lot lower than AGNC Investment’s monster dividend, it’s a much more sustainable payout. The REIT owns an increasingly diversified portfolio of income-producing commercial real estate, including retail, industrial, gaming, data centers, and other properties, secured by long-term net leases. That lease structure supplies it with stable and growing rental income. Tenants cover maintenance costs, building insurance, and real estate taxes. Meanwhile, most leases escalate rents each year.

The REIT pays out about 75% of its adjusted funds from operations (FFO) in dividends each year. It retains the rest, about $800 million annually, to invest in new income-producing properties. The company also has an elite balance sheet. That gives it a very low cost of capital to fund additional property investments.

Realty Income estimates it has the embedded growth drivers and financial resources to grow its adjusted FFO per share by 4% to 5% annually. That should enable the REIT to continue increasing its dividend, something it has done 124 times since going public in 1994. It has grown its payout at a 4.3% compound annual rate.

A blockbuster yield

EPR Properties offers in excess of an 8% monthly dividend. The REIT supports that payout with a growing portfolio of experiential real estate, such as movie theaters, eat-and-play venues, experiential lodging, and other properties. It leases these properties back to the operator under long-term, triple-net leases, which supply it with fairly stable rental income.

The REIT pays out a fairly conservative 70% of its FFO in dividends. That enables it to retain over $100 million in excess free cash flow each year to fund new investments. It also has a strong balance sheet, giving it additional flexibility to fund new investments. EPR expects to invest $200 million to $300 million in new properties this year. It has already lined up $240 million of development projects it expects to fund over the next two years.

The company estimates it has the internal funding capacity to grow its adjusted FFO per share by at least 4% per year without selling any additional stock. That should enable the company to continue increasing its high-yielding dividend. It gave investors a 3.6% raise earlier this year.

Another cut could happen

AGNC Investment has a very different business model. The mortgage REIT invests in mortgage-backed securities (MBSes) protected against credit losses by government agencies like Fannie Mae. That makes them very low-risk investments. However, they’re also relatively low-return investments. AGNC can boost the return by using leverage, which adds more risk.

The company’s strategy can pay big dividends. It can make a lot of money on the spread between its cost of capital and the interest income generated by its MBS investments during healthy market conditions. The issue is that changes in market conditions can narrow its spread. The spread can get so narrow that the company doesn’t make enough money to cover its costs and dividends. That has occurred several times throughout its history, causing it to cut its payout many times:

AGNC Dividend data by YCharts

A cut isn’t a concern right now. AGNC Investment’s CEO, Peter Federico, noted on the fourth-quarter call that the company is currently earning enough money to cover its operating costs and dividends. Meanwhile, some unfavorable headwinds appear poised to fade. However, if its returns fall out of alignment with its costs because of changing market conditions, it might need to realign its dividend again.

Focus on income sustainability

AGNC Investments offers an eye-popping yield. While that big-time monthly payout seems safe for now, changing market conditions in the future could cause the mortgage REIT to alter its dividend again.

Income-focused investors should consider whether Realty Income or EPR Properties are better options for their situations. Those REITs offer much more sustainable monthly dividends that should continue rising in the future. That growth could enable these REITs to produce higher total returns over the long term.

Should you invest $1,000 in AGNC Investment Corp. right now?

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Matt DiLallo has positions in EPR Properties and Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends EPR Properties. The Motley Fool has a disclosure policy.

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