Better Dividend Stock: Healthpeak Properties vs. AGNC Investment
May 19, 2025
Key Points
Real estate investment trusts (REITs) can be great dividend stocks. Many of these companies offer big-time dividend yields. Some even pay monthly dividends, making them ideal for those seeking recurring passive income.
AGNC Investment
(NASDAQ: AGNC)
and
Healthpeak Properties
(NYSE: DOC)
currently pay
prodigious
monthly dividends. Here's a look at which
REIT
is the better
dividend stock
to buy.
A higher-risk, high-yielding dividend stock
AGNC Investment is a
mortgage REIT
focused on investing in Agency
MBS
(residential mortgage-backed securities protected against credit risk by government agencies like
Fannie Mae)
. MBS are fixed-income investments that provide low-to-mid single-digit returns. AGNC Investments invests in MBS on a
leveraged
basis, which enhances its returns. This strategy supports the REIT's lucrative
15.7%-yielding
monthly dividend.
Despite all the volatility in the market these days, the outlook for agency MBS investments "continues to be very favorable," commented CEO Peter Federico on the REIT's first-quarter earnings conference call. He noted on the call that "a portfolio of swaps levered the way we lever them would generate a low-20% return." That aligns well with the company's total cost of capital (operating costs plus dividend payments), which is closer to 18%. With its returns above its costs, the REIT should have no problem continuing to pay its monster monthly dividend.
However, those are moving numbers.
For example, its
cost of
capital was 16.7% for most of the first quarter.
While its returns have moved favorably compared to its costs during the recent market volatility, that might not be the case
in the future
.
AGNC Investment has had to cut its dividend
in the past
when its returns fell below its costs. Because of that, the REIT isn't the best dividend stock for those seeking a highly sustainable income stream.
A healthy monthly dividend stock
Healthpeak Realty is a
healthcare REIT
. It has a diversified portfolio of outpatient medical, lab, and senior housing properties. Its outpatient medical portfolio provides
it with
stable and steadily rising cash flow (five-to-seven-year lease terms with contractual annual rental increases). The lab properties drive strong rent growth due to the demand for space in these facilities (11% rental increase on new and renewal leases signed last quarter)
.
Meanwhile
, the senior housing portfolio benefits from growing demand as the population ages. The REIT's stable and growing rental income supports its high-yielding monthly dividend (6.9% current yield).
Whereas AGNC Investment's income can fluctuate with market conditions, Healthpeak's rental income is rising. Its adjusted funds from operations (
FFO
) has grown 19% over the past three years, driven by its merger with Physicians Realty Trust, rent growth, and investments to expand its portfolio. It expects to generate between $1.81 and $1.87 per share of FFO as adjusted this year, more than enough to cover its $1.22-per-share dividend outlay. That gives it a big cushion while enabling the REIT to retain cash to fund new investments.
Healthpeak Properties has plenty of financial flexibility to continue expanding its portfolio. Its strong balance sheet currently provides it with $500 million to $1 billion of capacity to make accretive new investments.
These growth investments
, along with
rising rental income
,
should enable the REIT to increase its high-yielding monthly dividend (it recently raised its payout by 2%).
A more bankable dividend stock
AGNC Investment offers investors a monster monthly income stream. The caveat is that the REIT's income is more volatile. If market conditions change, it might need to reduce its dividend to realign the payment with its income.
On the other hand, Healthpeak Properties produces stable and growing rental income. Because of that, its dividend is on a much more sustainable foundation. Further, given its rising rental income and capacity to fund new investments, the REIT should be able to increase its dividend in the future. That more sustainable and growing payout makes it a better option for most income-seeking investors.
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Matt DiLallo
has no position in any of the stocks mentioned. The Motley Fool recommends Healthpeak Properties. The Motley Fool has a
disclosure policy
.
