Farmer Mac's Preferred Stock: A High-Yield, Low-Risk Income Play Amid Rising Rates

In an era where traditional income-generating assets like bonds and blue-chip equities offer paltry returns, income-focused investors are increasingly turning to niche opportunities that balance yield with stability. One such opportunity lies in Farmer Mac’s preferred stock (AGM.PR.D), which currently offers a compelling 6.35% yield while operating under a robust balance sheet and a conservative risk profile. With the Federal Reserve signaling prolonged higher interest rates and inflationary pressures persisting, the case for AGM.PR.D as a high-yield, low-risk play has never been stronger.

A Competitive Yield in a Dwindling Market

AGM.PR.D, a 5.70% non-cumulative preferred stock, trades at a 10.28% discount to its $25.00 liquidation preference, with a recent market price of $22.43 as of September 2025 [1]. This discount, combined with its fixed $1.425 annualized dividend, translates to a current yield of 6.35%, significantly outpacing the 3.8% yield of the 10-year U.S. Treasury and the 1.2% dividend yield of the S&P 500 [1]. For income investors, this represents a rare combination of attractive returns and downside protection, as the stock’s price has historically remained resilient despite macroeconomic volatility.

Fortress Balance Sheet and Earnings Outperformance

Farmer Mac’s financial strength underpins the security of its dividend payments. In Q2 2025, the company reported record core earnings of $47.4 million, a 19% year-over-year increase, and a net effective spread of $93.9 million, up 12% from the prior year [2]. Its balance sheet further reinforces confidence: total core capital stood at $1.6 billion, exceeding statutory requirements by 63%, while liquidity reserves covered 310 days of operations as of June 30, 2025 [2]. These metrics position Farmer Mac to withstand interest rate shocks and maintain its dividend schedule, even in a tightening environment.

To further strengthen its capital base, Farmer Mac recently issued 4 million shares of Series H preferred stock, raising $100 million in Tier 1 capital [3]. This move not only bolsters its ability to fund agricultural lending but also signals management’s commitment to preserving financial flexibility—a critical factor for sustaining dividends on preferred shares like AGM.PR.D.

Mitigating Non-Cumulative Risk

A potential concern for investors in preferred stocks is the non-cumulative dividend structure, which means unpaid dividends do not accumulate and are forgiven if the company skips a payment. However, Farmer Mac’s track record of 22 consecutive years of dividend payments and its recent earnings outperformance—exceeding both EPS and revenue forecasts in Q2 2025—mitigate this risk [3]. The company’s strong liquidity position and conservative leverage ratios (total assets of $32.99 billion as of Q2 2025 [2]) further reduce the likelihood of dividend cuts.

A Timely Opportunity for Income Investors

With the Federal Reserve’s rate-hiking cycle showing no immediate signs of abating, the window for securing high-yield assets like AGM.PR.D is narrowing. The stock’s current yield of 6.35%—coupled with Farmer Mac’s fortress balance sheet and non-cumulative risk profile—makes it an ideal addition to a diversified income portfolio. Investors seeking to capitalize on this opportunity should act before July 1, 2025, as rising interest rates or a shift in market sentiment could compress the stock’s yield further.

Conclusion

AGM.PR.D offers a rare trifecta of high yield, financial stability, and risk mitigation in today’s challenging market. While no investment is entirely without risk, Farmer Mac’s strong earnings, capital-raising initiatives, and conservative balance sheet make it a standout choice for income-focused investors. In a world where traditional safe havens underperform, AGM.PR.D stands as a beacon of value—provided investors act swiftly to secure their position.

Source:
[1] Federal Agricultural Mortgage Corp,
https://www.preferredstockchannel.com/symbol/agm.prd/
[2] Farmer Mac Reports Second Quarter 2025 Results,
https://www.prnewswire.com/news-releases/farmer-mac-reports-second-quarter-2025-results-302524662.html
[3] Farmer Mac Prices $100 Million of Series H Preferred Stock,
https://www.nasdaq.com/press-release/farmer-mac-prices-100-million-series-h-preferred-stock-2025-08-20