AGNC Investment (NASDAQ: AGNC) is a very complex business, but its 15% dividend yield is like a siren's song to dividend investors traveling along Wall Street. There are a lot of good reasons why income-focused investors should avoid AGNC, and the mortgage real estate investment trust (REIT) added a new one when it reported third-quarter earnings. Here's what you need to know before buying AGNC.

A property-owning REIT buys a building, like an apartment or warehouse, and leases it out to generate rental income. That's fairly easy to understand because it's exactly what you would do if you had a rental property. The only difference is the scale of the asset, with REITs owning institutional-level properties.

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The whole point of a REIT is that it gives smaller investors access to such cash-producing assets, which would normally be outside of their investment capacity.

AGNC isn't a property-owning REIT; it is a mortgage REIT. It buys mortgages that have been pooled into bond-like securities. In some ways, it is more like a mortgage-focused mutual fund that just happens to trade as a company. Mortgage bonds can be very hard to track for small investors.

Factors that affect the price of such securities include interest rates, housing market dynamics, mortgage repayment rates, and even the year of creation of the mortgage bond (sometimes called the vintage). As a shareholder, it is highly unlikely that you will be able to keep tabs on AGNC's portfolio.

There's another wrinkle here. AGNC Investment isn't really an income stock; it is a total return investment. Just look at the chart below -- the dividend has not only been volatile over time but it has been trending lower for years. The stock price has followed the dividend lower. And yet, if you reinvested the dividend, your total return would have been strongly positive. The big takeaway here is that if you spend AGNC's dividend on living expenses, like most dividend investors are probably looking to do, you will end up with less income and less capital.

AGNC Investment proudly noted that it sold stock to raise capital when it reported third-quarter 2024 results. That's not unusual at all; REITs issue stock to fund investments all the time. But here's the oddity: The CFO noted, "During the third quarter, we issued $781 million in common stock through our ATM program at a considerable premium to our tangible net book value." To simplify that just a little, the company sold stock for more than the company's shares were really worth.