AGNC Investment Keeps Issuing New Stock. Here's Why That Can Actually Be Good for Shareholders.
Key Points
AGNC Investment tells investors what it is worth each quarter by reporting tangible net book value per share.
If the company sells stock for more than its tangible net book value per share, the difference is like free money for shareholders.
AGNC Investment (NASDAQ: AGNC) is a mortgage real estate investment trust (REIT). This is a complex niche of the broader REIT sector that requires a bit more research to fully understand. All REITs pay out a material portion of their earnings as dividends to avoid corporate-level taxation, which basically forces them to sell shares to fund their growth. But the mREIT model changes the dynamic of stock sales in an important way.
What does AGNC Investment do?
AGNC Investment owns a portfolio of mortgage securities. It manages that portfolio, generating an income stream that it uses to pay its dividend. The dividend yield is a lofty 13.7% today, which is likely what most investors are focused on when they buy the stock.
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In some ways, AGNC is similar to a mutual fund. One important similarity is that, like a mutual fund, AGNC Investment reports the value of its business. For a mutual fund, that number is called the net asset value (NAV), and it is reported daily. AGNC Investment reports its tangible net book value per share, which is roughly similar to an NAV, on a quarterly basis.
AGNC's tangible net book value is the per-share value of its mortgage securities portfolio. At the end of the first quarter of 2026, that number stood at $8.38. Investors paying more than that figure for the stock are paying a premium. The share price is more than $10, so that is exactly what is happening right now. This can actually be a good thing for shareholders if AGNC Investment is issuing new stock.
REITs pay out at least 90% of taxable earnings to avoid corporate taxation. To fund growth, REITs sell stock. But AGNC isn't buying buildings; it is buying mortgage securities. If it can sell stock for more than its tangible net book value per share, it is like finding free money. The mREIT can buy more new mortgage securities than it would otherwise be able to if stock buyers only paid what the existing portfolio was actually worth on a per-share basis. We know this because tangible net book value per share is based on the actual value of the mortgage securities AGNC owns, which trade daily. Buildings, by comparison, trade far less frequently, and their value is more subjective.
AGNC is creating value, not diluting shareholders
When a company sells new shares, it dilutes shareholders' ownership because the business's value is now spread across more shares. The hope is that the cash raised will be invested to increase the company's value, which may or may not happen. This is how investors should view most REIT stock sales. AGNC and other mortgage REITs are a little different.
If AGNC Investment sells shares for more than tangible net book value, the move is inherently beneficial to existing shareholders because of the unique dynamics of the mREIT niche. Of course, issuing shares below tangible net book value per share would have the opposite effect. Still, the mREIT's steadily rising share count isn't a concerning sign, as long as it continues to sell that stock at a price above its tangible net book value.
Reuben Gregg Brewer 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.