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AGNC Investment vs. Annaly: Which mREIT is the Smarter Play?
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Key Takeaways
AGNC and NLY offer strong dividends, but NLY recently hiked its payout while AGNC has held steady for 5 years.
NLY's broader portfolio may reduce rate sensitivity, while AGNC's MBS focus exposes it to volatility.
NLY's 2025-2026 earnings are projected to grow, while AGNC faces expected y/y declines.
AGNC Investment Corp. (AGNC - Free Report) and Annaly Capital Management (NLY - Free Report) are two of the biggest names within the mortgage real estate investment trusts (mREITs) industry. Both offer favorable long-term returns to stockholders, along with a substantial dividend yield, but differ in their portfolio strategies and risk profiles.
But which one offers the better opportunity for investors right now? Let us break down the strengths, risks and growth potential of these two leading industry players.
AGNC & NLY: Capital Distribution & Dividend Yield
AGNC Investment and Annaly are showcasing strong capital distribution programs that reflect confidence in their liquidity and earnings stability. Both have a record of paying regular dividends.
AGNC currently has a staggering dividend yield of 15.34%. It currently sits at a payout ratio of 81%. The company has not raised its dividend in the last five years.
NLY also pays a regular dividend. In March 2025, it announced a cash dividend of 70 cents per share for the first quarter of 2025, marking a 7.7% hike from the prior payout. Its current dividend yield is 14.37% with a payout ratio is 101% of its earnings. It has raised its dividend once in the last five years.
Dividend Yield
Image Source: Zacks Investment Research
Dividends aside, AGNC has a share repurchase plan in place. In October 2024, the company’s board of directors terminated the existing stock repurchase plan and replaced it with a new plan, authorizing the repurchase of up to $1 billion of common stock through Dec. 31, 2026. As of March 31, 2025, the full authorization was available for repurchase.
Similarly, Annaly has a share repurchase plan in place. In December 2024, the company’s board of directors authorized a common share repurchase program, which will expire on Dec. 31, 2029. Under the program, the company may repurchase up to $1.5 billion of its outstanding shares of common stock. However, the company has not repurchased shares under this plan since its announcement.
AGNC & NLY: Business Model & Portfolio Diversification
AGNC Investment has maintained its focus entirely on agency mortgage-backed securities (MBS), a strategy that has positioned it as a strong player in this specialized market segment. The company primarily focuses on leveraged investments in Agency MBS, including residential mortgage pass-through securities and collateralized mortgage obligations. A U.S. Government agency or a U.S. Government-sponsored enterprise guarantees the principal and interest payments for such investments.
The fundamental outlook for fixed income, particularly agency MBS assets, has shown signs of improvement lately. AGNC Investment’s management believes that the agency MBS market can benefit from a combination of factors, including a steepening yield curve and reduced rate volatility. However, execution will be crucial to achieving these advantages.
Then again, Annaly has adopted a broader diversified capital allocation strategy. The company's investment portfolio includes residential credit, mortgage servicing rights (MSR), and agency MBS. This comprehensive strategy aims to lower volatility and sensitivity to interest rate changes while simultaneously generating appealing risk-adjusted returns.
Annaly's diversified investment strategy will likely be a key contributor to long-term growth and stability. Annaly’s diversified strategy is not just for stability, but also for long-term growth, with multiple aspects to pull across different cycles in the housing and credit markets.
AGNC & NLY: Interest Rate Sensitivity
AGNC Investment and Annaly are sensitive to fed interest rate changes, though the impact varies.
AGNC Investment’s performance and prospects are significantly influenced by the interest rate environment due to its concentrated agency MBS exposure. While these government-backed assets offer low credit risk, they leave AGNC vulnerable to rapid shifts in short-term rates.
When interest rates rise, AGNC’s borrowing costs increase quickly, hurting profit margins. Though the company actively uses hedging strategies such as interest rate swaps and options to manage some of this exposure, hedges can only partially reduce the impacts.
AGNC’s financials have been adversely impacted since early 2022 when the Federal Reserve began its interest rate hiking cycle. It recorded interest expenses of $75 million in 2021, which surged 733% to $625 million in 2022. Also, interest expenses skyrocketed 266% year over year to $2.3 billion in 2023. Despite the Fed cutting rates by 100 basis points in 2024, AGNC’s interest expenses still rose 28% year over year to $2.9 billion. In the first quarter of 2025, the metric rose 2.2% year over year to $687 million.
On the contrary, Annaly has positioned itself to better withstand interest rate volatility through its diversified portfolio, particularly with its investments in MSR, and residential and commercial credit assets. Given this, the increase in NLY’s borrowing costs was lower than that of AGNC.
In 2021, Annaly recorded interest expenses of $249 million, which skyrocketed 425% to $1.3 billion in 2022. Also, interest expenses rose 193% year over year to $3.8 billion in 2023. In 2024, interest expenses grew 10.3% year over year to $1.2 billion. In the first quarter of 2025, the metric declined marginally year over year to $1.1 billion.
MSR increases in value when interest rates rise because higher rates reduce mortgage prepayment activity. This dynamic allows Annaly to offset the typical decline in agency MBS valuations that occurs during periods of rising rates. Residential credit includes non-agency mortgages and securitized loans that are more credit-sensitive than rate-sensitive, offering higher yields and different risk profiles than agency MBS.
AGNC & NLY: Benefits From Mortgage Rates
Mortgage rates are witnessing a decline. According to a Freddie Mac report, the average 30-year fixed-rate mortgage stood at 5.80% as of July 3, 2025, down from 6.95% in the same week a year ago. This drop is expected to ease housing affordability challenges and support demand in the mortgage market.
Both Annaly and AGNC Investment stand to benefit, but in distinct ways based on their strategies and portfolio composition.
NLY is likely to see stronger book value appreciation, driven by tightening spreads in the Agency MBS market, which are lifting asset prices. This also supports wider net interest spreads and higher portfolio yields. Its broader exposure to housing credit trends may allow it to capitalize more on increased originations across both residential and commercial channels. Annaly, with a more diversified business model, may navigate volatility better and capture additional upside from yield curve movements and credit spreads.
AGNC, while similarly exposed to Agency MBS, may benefit more modestly in terms of book value, but stands to gain from more favorable reinvestment spreads as refinancing picks up. AGNC Investment, with a more focused agency strategy, is positioned to benefit from refinancing volume, improving its gain-on-sale margins, and investment pipeline. It may see greater relief from operational and financial pressures as borrower activity rebounds, providing more stability in earnings and cash flow.
How Do Earnings Estimates Compare for AGNC & Annaly?
The Zacks Consensus Estimate for AGNC Investment’s 2025 and 2026 earnings implies year-over-year declines of 11.2% and 3.9%, respectively. Earnings estimates for both years have been unchanged over the past week.
AGNC Earnings Estimates
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Annaly’s 2025 and 2026 earnings implies year-over-year rallies of 6.3% and 1.4%, respectively. Earnings estimates for both years have been unchanged over the past week.
NLY Earnings Estimates
Image Source: Zacks Investment Research
AGNC & NLY: Price Performance & Valuations
Over the past year, both AGNC Investment and Annaly outperformed the industry. AGNC has gained 12.6%, whereas NLY has risen 17.7% compared with the industry’s rise of 8.6%.
Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, AGNC and NLY appear expensive relative to the industry. AGNC is currently trading at a premium with a forward 12-month price-to-tangible book (P/TB) multiple of 1.10X, while NLY is currently trading at a forward 12-month (P/TB) multiple of 0.99X.
Price-to-Tangible Book TTM
Image Source: Zacks Investment Research
Both are above the industry average of 0.98X. Nonetheless, NLY is trading at a discount to AGNC.
AGNC & NLY: Which mREIT Offers More Value?
AGNC Investment and Annaly have a record of reducing dividends during stressful times, but NLY’s recent payouts have been more stable than AGNC's. Also, Annaly has recently hiked its dividend, reflecting the company’s confidence in its earnings and liquidity position.
AGNC has mainly exposure to the agency MBS sector, positioning it to have more exposure to rate-driven volatility. Conversely, NLY provides diversification and balance, better suited to offset interest rate fluctuations and capitalize on opportunities.
Annaly’s 2025 and 2026 earnings growth trajectory is impressive. In terms of price performance and valuation, NLY appears more attractive.
Hence, Annaly is well-positioned to offer long-term stability with a higher dividend yield.
Image: Bigstock
AGNC Investment vs. Annaly: Which mREIT is the Smarter Play?
Key Takeaways
AGNC Investment Corp. (AGNC - Free Report) and Annaly Capital Management (NLY - Free Report) are two of the biggest names within the mortgage real estate investment trusts (mREITs) industry. Both offer favorable long-term returns to stockholders, along with a substantial dividend yield, but differ in their portfolio strategies and risk profiles.
But which one offers the better opportunity for investors right now? Let us break down the strengths, risks and growth potential of these two leading industry players.
AGNC & NLY: Capital Distribution & Dividend Yield
AGNC Investment and Annaly are showcasing strong capital distribution programs that reflect confidence in their liquidity and earnings stability. Both have a record of paying regular dividends.
AGNC currently has a staggering dividend yield of 15.34%. It currently sits at a payout ratio of 81%. The company has not raised its dividend in the last five years.
NLY also pays a regular dividend. In March 2025, it announced a cash dividend of 70 cents per share for the first quarter of 2025, marking a 7.7% hike from the prior payout. Its current dividend yield is 14.37% with a payout ratio is 101% of its earnings. It has raised its dividend once in the last five years.
Dividend Yield
Image Source: Zacks Investment Research
Dividends aside, AGNC has a share repurchase plan in place. In October 2024, the company’s board of directors terminated the existing stock repurchase plan and replaced it with a new plan, authorizing the repurchase of up to $1 billion of common stock through Dec. 31, 2026. As of March 31, 2025, the full authorization was available for repurchase.
Similarly, Annaly has a share repurchase plan in place. In December 2024, the company’s board of directors authorized a common share repurchase program, which will expire on Dec. 31, 2029. Under the program, the company may repurchase up to $1.5 billion of its outstanding shares of common stock. However, the company has not repurchased shares under this plan since its announcement.
AGNC & NLY: Business Model & Portfolio Diversification
AGNC Investment has maintained its focus entirely on agency mortgage-backed securities (MBS), a strategy that has positioned it as a strong player in this specialized market segment. The company primarily focuses on leveraged investments in Agency MBS, including residential mortgage pass-through securities and collateralized mortgage obligations. A U.S. Government agency or a U.S. Government-sponsored enterprise guarantees the principal and interest payments for such investments.
The fundamental outlook for fixed income, particularly agency MBS assets, has shown signs of improvement lately. AGNC Investment’s management believes that the agency MBS market can benefit from a combination of factors, including a steepening yield curve and reduced rate volatility. However, execution will be crucial to achieving these advantages.
Then again, Annaly has adopted a broader diversified capital allocation strategy. The company's investment portfolio includes residential credit, mortgage servicing rights (MSR), and agency MBS. This comprehensive strategy aims to lower volatility and sensitivity to interest rate changes while simultaneously generating appealing risk-adjusted returns.
Annaly's diversified investment strategy will likely be a key contributor to long-term growth and stability. Annaly’s diversified strategy is not just for stability, but also for long-term growth, with multiple aspects to pull across different cycles in the housing and credit markets.
AGNC & NLY: Interest Rate Sensitivity
AGNC Investment and Annaly are sensitive to fed interest rate changes, though the impact varies.
AGNC Investment’s performance and prospects are significantly influenced by the interest rate environment due to its concentrated agency MBS exposure. While these government-backed assets offer low credit risk, they leave AGNC vulnerable to rapid shifts in short-term rates.
When interest rates rise, AGNC’s borrowing costs increase quickly, hurting profit margins. Though the company actively uses hedging strategies such as interest rate swaps and options to manage some of this exposure, hedges can only partially reduce the impacts.
AGNC’s financials have been adversely impacted since early 2022 when the Federal Reserve began its interest rate hiking cycle. It recorded interest expenses of $75 million in 2021, which surged 733% to $625 million in 2022. Also, interest expenses skyrocketed 266% year over year to $2.3 billion in 2023. Despite the Fed cutting rates by 100 basis points in 2024, AGNC’s interest expenses still rose 28% year over year to $2.9 billion. In the first quarter of 2025, the metric rose 2.2% year over year to $687 million.
On the contrary, Annaly has positioned itself to better withstand interest rate volatility through its diversified portfolio, particularly with its investments in MSR, and residential and commercial credit assets. Given this, the increase in NLY’s borrowing costs was lower than that of AGNC.
In 2021, Annaly recorded interest expenses of $249 million, which skyrocketed 425% to $1.3 billion in 2022. Also, interest expenses rose 193% year over year to $3.8 billion in 2023. In 2024, interest expenses grew 10.3% year over year to $1.2 billion. In the first quarter of 2025, the metric declined marginally year over year to $1.1 billion.
MSR increases in value when interest rates rise because higher rates reduce mortgage prepayment activity. This dynamic allows Annaly to offset the typical decline in agency MBS valuations that occurs during periods of rising rates. Residential credit includes non-agency mortgages and securitized loans that are more credit-sensitive than rate-sensitive, offering higher yields and different risk profiles than agency MBS.
AGNC & NLY: Benefits From Mortgage Rates
Mortgage rates are witnessing a decline. According to a Freddie Mac report, the average 30-year fixed-rate mortgage stood at 5.80% as of July 3, 2025, down from 6.95% in the same week a year ago. This drop is expected to ease housing affordability challenges and support demand in the mortgage market.
Both Annaly and AGNC Investment stand to benefit, but in distinct ways based on their strategies and portfolio composition.
NLY is likely to see stronger book value appreciation, driven by tightening spreads in the Agency MBS market, which are lifting asset prices. This also supports wider net interest spreads and higher portfolio yields. Its broader exposure to housing credit trends may allow it to capitalize more on increased originations across both residential and commercial channels. Annaly, with a more diversified business model, may navigate volatility better and capture additional upside from yield curve movements and credit spreads.
AGNC, while similarly exposed to Agency MBS, may benefit more modestly in terms of book value, but stands to gain from more favorable reinvestment spreads as refinancing picks up. AGNC Investment, with a more focused agency strategy, is positioned to benefit from refinancing volume, improving its gain-on-sale margins, and investment pipeline. It may see greater relief from operational and financial pressures as borrower activity rebounds, providing more stability in earnings and cash flow.
How Do Earnings Estimates Compare for AGNC & Annaly?
The Zacks Consensus Estimate for AGNC Investment’s 2025 and 2026 earnings implies year-over-year declines of 11.2% and 3.9%, respectively. Earnings estimates for both years have been unchanged over the past week.
AGNC Earnings Estimates
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Annaly’s 2025 and 2026 earnings implies year-over-year rallies of 6.3% and 1.4%, respectively. Earnings estimates for both years have been unchanged over the past week.
NLY Earnings Estimates
Image Source: Zacks Investment Research
AGNC & NLY: Price Performance & Valuations
Over the past year, both AGNC Investment and Annaly outperformed the industry. AGNC has gained 12.6%, whereas NLY has risen 17.7% compared with the industry’s rise of 8.6%.
Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, AGNC and NLY appear expensive relative to the industry. AGNC is currently trading at a premium with a forward 12-month price-to-tangible book (P/TB) multiple of 1.10X, while NLY is currently trading at a forward 12-month (P/TB) multiple of 0.99X.
Price-to-Tangible Book TTM
Image Source: Zacks Investment Research
Both are above the industry average of 0.98X. Nonetheless, NLY is trading at a discount to AGNC.
AGNC & NLY: Which mREIT Offers More Value?
AGNC Investment and Annaly have a record of reducing dividends during stressful times, but NLY’s recent payouts have been more stable than AGNC's. Also, Annaly has recently hiked its dividend, reflecting the company’s confidence in its earnings and liquidity position.
AGNC has mainly exposure to the agency MBS sector, positioning it to have more exposure to rate-driven volatility. Conversely, NLY provides diversification and balance, better suited to offset interest rate fluctuations and capitalize on opportunities.
Annaly’s 2025 and 2026 earnings growth trajectory is impressive. In terms of price performance and valuation, NLY appears more attractive.
Hence, Annaly is well-positioned to offer long-term stability with a higher dividend yield.
Both AGNC and NLY currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.