Annaly Capital Management Vs. AGNC Investment Corp: Which Is The Better Buy?

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While 2022 was a difficult year for most real estate investment trusts (REITs), the worst-performing subindustry was mortgage REITs (mREITs). 

The mREIT loss percentages ranged from the mid-teens to almost 60%. Inflation and interest rate hikes cut deeply into mREITs and contributed to the decimation of share prices.

Still, mREITs remain popular for one main reason — they pay incredibly high dividend yields, which in bad years tempers the loss of principal and in good years adds to the total profitable return. But mREITs are not for everyone because they are high beta stocks that are often quite volatile.

Take a look at two of the most popular mREITs today and a comparison of them in eight different categories to see which is the better one to buy.

Annaly Capital Management Inc. NLY is a New York-based mortgage REIT that invests in mortgage-backed securities in order to loan money on residential properties backed by Fannie Mae, Freddie Mac or Ginnie Mae.

Annaly Capital Management had a reverse 1-to-4 stock split in September, and shares fell about 25% thereafter.

AGNC Investment Corp. AGNC is a Bethesda, Maryland-based mREIT that invests in U.S. government-guaranteed pass-through securities and collateralized mortgage obligations.

Both REITs have performed well recently, especially after it was reported that legendary Bond King Bill Gross was buying a large number of shares of both companies.

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Size and Diversity 

Annaly Capital Management’s market cap is $10.15 billion. It has total assets of $86 billion and has been in business for over 25 years. Its investment strategies include agency mortgage-backed securities, mortgage servicing rights and residential real estate.

AGNC Investment Corp.’s market cap is $6.08 billion. It has total assets of $58.52 billion and has been in business for 15 years. It invests predominately in agency residential mortgage-backed securities.

The edge goes to Annaly Capital Management in this category because of 10 more years of service, a larger market cap and a bit more diversification in its business model.

Performance Over Time

Since its initial public offering (IPO) in May 2008, AGNC Investment Corp. has produced a total return of 194.78%. Over that same time period, Annaly Capital Management has a total return of 62.91%.

Over the past 52 weeks, Annaly Capital Management is down 33.14%, while AGNC Investment Corp. is down 31.68%. Over the past four weeks, AGNC Investment has gained 8.14% to just 1.78% for Annaly Capital Management.

AGNC Investment Corp is clearly the superior REIT in total return performance over both shorter and longer time frames.

Dividend Yield

Annaly Capital Management pays a quarterly dividend of $0.88, or $3.52 annually, for a present yield of 16.22%, while AGNC Investment Corp pays a monthly dividend of $0.12, or $1.44 annually, for a present yield of 13.54%.

While receiving monthly dividends is advantageous to income investors, the much higher dividend yield makes Annaly Capital Management the winner of this category.

Dividend Growth and Stability

Both Annaly Capital Management and AGNC Investment Corp. have always paid large dividends that compensated for higher degrees of volatility. But Annaly Capital Management has cut its dividend twice over the past five years by a total of 26.6% and AGNC Investment Corp. has cut its dividend twice by 33.33%.

Although the dividend growth and stability of both companies are terrible, AGNC Investment Corp.’s percentage cut is somewhat worse, so the edge in this category goes to Annaly Capital Management.

Dividend Coverage by EPS

Annaly Capital Management has forward earnings per share (EPS) of $4.26 and an annual dividend of $3.52, for a payout ratio of 82%. AGNC Investment Corp. has forward EPS of $3.33 which nicely covers the $1.44 dividend with a payout ratio of only 43.2%.

No contest here — AGNC Investment Corp. easily has the better dividend coverage by earnings per share with its payout ratio almost half that of its rival.

Price-Earnings (P/E) Ratio

Unlike most REITs that use funds from operations (FFO), mREITs use P/E ratios to measure the relationship between share price and earnings. Annaly Capital Management has a forward P/E ratio of 5.09, while AGNC Investment Corp.’s P/E ratio is 3.03. Both P/E ratios are low, but AGNC Investment Corp. has a lower P/E and wins this category.

Debt Ratio

Annaly Capital Management has total debt of $63.78 billion in its most recent quarter, and its ratio of debt/equity is 582.36. AGNC Investment Corp. has total debt of $41.63 billion and its ratio of debt/equity is 576.36. Both company ratios have extremely high debt, but AGNC Investment Corp.’s is slightly better, so give this category to AGNC Investment Corp.

Most Recent Operating Results

Annaly Capital Management’s third-quarter operating results produced earnings per share of $1.06, beating analyst expectations by $0.07. But the EPS was $0.06 worse than its third quarter of 2021.

AGNC Investment Corp. had EPS of $0.84, which was $0.15 better than analyst estimates and also $0.10 better than its third-quarter 2021 EPS.

AGNC Investment Corp. had better third-quarter results and wins this category as well.


Annaly Capital Management was better in size and diversity, dividend yield and dividend growth/stability.

AGNC Investment Corp. holds the advantage in the categories of performance over time, dividend coverage by EPS, P/E ratio, debt ratio and most recent operating results.

Total category score: AGNC Investment Corp.: 5, Annaly Capital Management: 3.

Things may be looking up for both of these REITs after both suffered terrible performances in 2022, but if an investor has to choose only one to buy in 2023, AGNC Investment Corp. is the better buy of the two.

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