This has been a bad year for short-term investors, but not for traders who buy hold for the long haul. Currently, there are two or more ultra-high-yield dividend stocks that might double your principal by the end of 2028.
Currently, dividend yields from AGNC Investment and Annaly Capital Management are 12.2% and 13.8%, respectively, for investors. Investors who purchase shares now and reinvest their dividends stand to see their initial investment more than double by 2028.
Of course, these stocks must keep paying out at the same rate. The market anticipates difficulty coming that will force these highly specialized equities to reduce their dividends, which is why they now provide mouth-watering yields.
Do these stocks merit the danger? Find out why they give such high returns before risking any of your hard-earned cash.
Investment by AGNC
This real estate investment trust (REIT) has no real estate holdings. AGNC Investment purchases mortgage-backed securities rather than real estate. More precisely, the corporation concentrates on securities whose principals are backed by the United States government and have a long history of interest payments.
The business strategy of mortgage REITs is rather simple. With money they borrow at comparatively low short-term loan rates, they hope to purchase high-yielding long-term assets. Because short-term rates have been increasing more quickly than long-term rates, AGNC Investment’s stock price is under pressure.
You undoubtedly already know that the Federal Reserve has been boosting interest rates to battle growing inflation if you’ve been reading financial media over the last year. Short-term loan rates have increased more recently than long-term lending rates. For mortgage REITs like AGNC, this circumstance, known as an inverted yield curve, makes it difficult for them to generate any revenue. Due to this, the business lost $1.08 billion in the first quarter of this year and an additional $729 million in the second.
The most crucial thing for a regular investor to keep in mind concerning inverted yield curves is that they are transient. Despite being in a difficult situation right now, AGNC Investment may find itself in a better position later on.
Capital Management Annaly
Another mortgage REIT that now provides a high dividend yield is Annaly Capital Management. Investors are concerned that the business won’t be able to continue its payment when rates rise too quickly. Despite this, Annaly has continued to generate net earnings this year that are more than enough to cover its dividend commitment.
The bulk of Annaly’s money is being invested in securities guaranteed by government entities, similar to AGNC Investment. Additionally, Annaly has a mortgage servicing business stream that is expanding quickly.
The annual payment for mortgage servicing rights is normally 0.25 percent of the entire mortgage debt. Increased interest rates have the direct effect of increasing Annaly’s expenses and mortgage amounts. While the corporation shifts its portfolio into new agency-backed securities that provide greater rates of return, this might be a useful hedge.