High Yields, Bad Choices: AGNC, ARMOUR, and Orchid Island Face Sustainability Concerns

Investors seeking high yields often overlook the long-term sustainability of the dividend yield. AGNC Investment Corp., ARMOUR Residential, and Orchid Island Capital are not ideal investments due to their high premiums to tangible book value and the expiring hedges that will increase their cost of funds. Even if the Federal Reserve cuts rates, the cost of funds will rise due to the expiring swaps. Investors should focus on research rather than just yield when making investment decisions.

Investors seeking high yields often overlook the long-term sustainability of the dividend yield. High dividend yields can be enticing, but they may come with significant risks. This article examines AGNC Investment Corp., ARMOUR Residential, and Orchid Island Capital, highlighting why these companies may not be ideal investments despite their high yields.

AGNC Investment Corp., a company that invests in Agency residential mortgage-backed securities (Agency MBS), has been a favorite among high-yield investors. The company has an impressive dividend yield of 15.29% [3]. However, investors should be cautious. AGNC's high premium to tangible book value and the expiring hedges that will increase its cost of funds pose significant risks. Even if the Federal Reserve cuts rates, the cost of funds will rise due to the expiring swaps, potentially impacting the company's profitability and ability to maintain its dividend payouts.

ARMOUR Residential, another high-yield dividend stock, also faces similar challenges. The company's high premium to tangible book value and the expiring hedges that will increase its cost of funds make it a risky investment. While the company may offer a high dividend yield, investors should be wary of the potential for dividend cuts if the cost of funds rises.

Orchid Island Capital, a real estate investment trust (REIT), also has a high dividend yield. However, the company's high premium to tangible book value and the expiring hedges that will increase its cost of funds make it a risky investment. Like ARMOUR Residential, Orchid Island Capital may struggle to maintain its dividend payouts if the cost of funds rises.

Investors should focus on research rather than just yield when making investment decisions. High-yield dividend stocks may seem attractive, but they often come with significant risks. It's crucial to assess the sustainability of the dividend yield and the company's ability to maintain its payouts in the face of rising costs.

In conclusion, while high-yield dividend stocks can offer attractive income, investors should be cautious. Companies like AGNC Investment Corp., ARMOUR Residential, and Orchid Island Capital may not be ideal investments due to their high premiums to tangible book value and the expiring hedges that will increase their cost of funds. Investors should conduct thorough research and assess the long-term sustainability of the dividend yield before making investment decisions.

References:
[1] https://www.fool.com/investing/2025/07/09/1-magnificent-high-yield-dividend-stock-down-50-to/
[2] https://www.ainvest.com/news/high-yield-dividends-2025-finding-balance-reward-risk-2507/
[3] https://za.investing.com/news/company-news/agnc-investment-corp-declares-012-monthly-dividend-for-july-2025-93CH-3783850