AGNC Investment Corp. has reported a strong financial performance in the third quarter, driven by a favorable market environment resulting from the Federal Reserve's policy adjustments. The company, a real estate investment trust (REIT) specializing in agency mortgage-backed securities (MBS), saw a significant increase in comprehensive net income and tangible net book value per share. This robust performance has cemented the stability of its attractive monthly dividend, positioning the REIT for continued prosperity in the evolving investment landscape.
In the third quarter, AGNC Investment generated an impressive $0.78 per share in comprehensive net income, which encompasses both earned income and changes in investment values. This figure comfortably covered the REIT's monthly dividend payments of $0.12 per share, totaling $0.36 for the quarter. Additionally, the company's tangible net book value per share, representing assets minus liabilities and intangible items, rose by $0.47, marking a 6% increase from the previous quarter.
When factoring in dividend payouts, the total economic return on tangible common equity—a key indicator of overall return based on actual cash and equity—reached a solid 10.6% during the period. This represents a substantial improvement compared to the challenging second quarter, where the company experienced a comprehensive loss of $0.13 per share and a negative 1% economic return.
The primary driver behind this remarkable turnaround was the Federal Reserve's strategic shift in monetary policy. During the quarter, the Fed reduced the federal funds rate and signaled further potential cuts, alleviating concerns about fiscal policy. CEO Peter Federico highlighted that this easing led to a strong performance in financial markets and a notable boost in investor confidence. He specifically noted that agency mortgage-backed securities emerged as one of the top-performing fixed-income asset classes, outperforming U.S. Treasuries for five consecutive months—a first since 2013. These positive market conditions were instrumental in fueling the REIT's robust economic return.
Looking forward, the favorable market dynamics are expected to continue supporting AGNC Investment's growth. Federico expressed optimism regarding the outlook for Agency MBS, citing factors such as a manageable supply of these securities and increasing demand as interest rates decline. As the largest leveraged Agency MBS-focused investment vehicle, AGNC Investment is well-positioned to achieve attractive risk-adjusted returns in this changing investment climate.
The company has proactively strengthened its financial standing by raising additional capital. In the third quarter, AGNC Investment issued $345 million in preferred stock, marking the largest such offering by a mortgage REIT since 2021. Furthermore, it issued over $300 million of its common stock at a premium to its book value, providing substantial capital for new MBS investments. These strategic moves have allowed the company to actively expand its portfolio, with total assets growing from $80.3 billion in the second quarter to $90.8 billion by the end of the third quarter. The average yield on its portfolio increased from 4.87% to 4.95%, while the average cost of repurchase agreements, used for short-term financing, slightly decreased from 4.44% to 4.43%. With $7.2 billion in unencumbered cash and Agency MBS, the REIT maintains robust liquidity to continue its portfolio expansion.
The current healthy market conditions are critical in sustaining AGNC Investment's high-yielding monthly dividend, which has been consistently paid for over five years. The REIT is well-equipped to generate sufficient returns on its investments to maintain this payout. Initial concerns about market turbulence earlier in the year have dissipated, paving the way for a more stable and positive environment for these investments. As a result, AGNC is thriving, placing its substantial dividend on a much more secure foundation for the foreseeable future.
