Why I Chose Ladder Capital Over AGNC Investment
Current Dividend Choices in mREITs
AGNC Investment (AGNC) currently boasts an impressive 13.5% dividend yield. Despite being enticed by this high yield and the consistent monthly payments, I’ve opted to invest in Ladder Capital (LADR), another mortgage REIT.
The Appeal of AGNC Investment
AGNC’s dividends are tempting due to their size and frequency, supplemented by a commendable streak of 75 consecutive monthly payments. However, its heavy focus on Agency MBS and use of leverage poses risks.
Key Concerns with AGNC:
- Leverage Dependency: AGNC leverages its investments with a ratio of 7.4, which amplifies both returns and risks.
- Potential dividend cuts: The REIT has a history of cutting dividends during challenging market conditions, raising concerns about future payouts.
Why Ladder Capital Stands Out
Ladder Capital employs a diversified investment strategy:
- Portfolio Composition: It finances commercial real estate, with 49% in senior secured loans, 33% in AAA bonds backed by these loans, and 18% in owned properties.
- Lower Risk Profile: This diversification reduces its risk compared to AGNC, and it allows more flexibility in capital allocation.
Financial Strength of Ladder Capital
Ladder Capital maintains a lower leverage ratio of 2.3, which complements its investment-grade balance sheet. This rating sets it apart in the commercial real estate sector, offering better financial flexibility and reduced risk.
Growth vs. Static Income
While AGNC may offer a more substantial monthly payout, I am seeking a balance of income and growth potential. Ladder Capital provides a yield of over 9.5% along with the possibility of share price appreciation and dividend growth.
Conclusion: A Better Investment Choice
Given my desire for a mix of income and growth, Ladder Capital’s lower risk and diversified approach make it a more attractive investment than AGNC. This choice aligns better with my long-term financial goals, prioritizing both return on investment and risk management.
