My Top Pick For October Yields 14%: AGNC Investment

Oct. 04, 2025 AGNC Investment Corp. (AGNC) StockAGNC

Rida Morwa

Summary

• Whispers of rate cuts pushed AGNC to market-beating returns; the cuts have arrived and will benefit earnings.
• The benefit is cumulative over time, not instantaneous for AGNC.
• Collect monthly income and enjoy as your capital climbs in value.
• Looking for a portfolio of ideas like this one ?

Co-authored by Treading Softly

There’s a well-known Wall Street adage that says, “Buy the rumour, sell the news.”

Many investors were expecting interest rate-sensitive investments to immediately spike once interest rates were cut, if they were cut, and as such, a lot of interest rate-sensitive investments were climbing on the expectation of rate cuts to occur.

The Federal Reserve cut its target rate by 25 bps, with one dissenter who wanted to cut rates by 50 bps. Another rate cut is widely expected in October. While there is plenty of time for economic reports to change expectations, it is clear that the Federal Reserve is increasingly concerned about the labor market and believes that the risks of unemployment rising are higher than the risk of inflation.

Interestingly, after the rate cut decision, both the general market (SPX) as well as REITs (VNQ), which generally benefit from interest rate cuts, sold off. This isn’t expected to be a long-term trend, but for the market itself, it meant that there was more information given in the update from the rate cut that concerned investors than the excitement over the rate cut itself. It also followed the very well-known adage: once the rate cut was news, people were selling, trying to lock in any gains they benefited from by buying the rumor ahead of time.

Today, I want to look at an investment that we have covered previously that benefits tremendously from rate cuts. These kinds of benefits, though, don’t happen overnight. They happen over time, and we can expect those benefits to accumulate even more so as additional rate cuts occur, if they do.

Let’s dive in!

I’m Still Buying Rate-Sensitive Opportunities

Interest-rate-sensitive stocks benefit from a dovish Fed, and there are few stocks that are more interest-rate-sensitive than agency mREITs like AGNC Investment Corp. (NASDAQ:AGNC), yielding 14.4%.

AGNC primarily invests in “agency MBS”, which are mortgage-backed securities that are guaranteed by the agencies Fannie Mae or Freddie Mac. If a borrower defaults, the agency buys the mortgage back at par value. Agency MBS typically trade with a very high correlation and at a relatively tight spread over US Treasuries, because they are considered very low risk from a credit perspective.

However, since mortgages can be prepaid whenever a borrower wants, and often are prepaid through refinancing, selling the house, or making extra payments, agency MBS does diverge from US Treasuries. If you buy a 30-year Treasury Bond, you know you won’t be paid back until maturity in 30 years. If you buy a 30-year agency MBS, you can expect to get most of your money back in 5-7 years. The life expectancy of agency MBS can be projected, but it cannot be known because it is very dependent upon interest rate movements.

AGNC takes advantage of the difference by borrowing short-term using a form of lending known as repos. Repos are very low risk for the lenders because they have the right to the underlying collateral, in this case, agency MBS. Also, the contracts are typically less than 90 days, creating a very low duration risk for the lender. As a result, the lending rate on repos is typically very close to the Federal Reserve’s target rate.

The risk is that AGNC’s assets are MBS that can be expected to remain outstanding for several years. The risk to AGNC is that its cost of borrowing can exceed the yield it receives. AGNC’s cash flow will be directly impacted by its average asset yield minus its cost of funds: Source

The Federal Reserve’s target rate was above AGNC’s average asset yield for a couple of years. Today, it is 4-4.25%, providing a comfortable cushion.

Yet if we look at AGNC’s cost of funds, we can see that it is 2.86%, which is much lower than the Fed rate. This is caused by AGNC’s hedging portfolio, specifically its interest-rate swaps. Contracts where AGNC agrees to pay a fixed interest rate and receives a floating interest rate. AGNC aggressively bought up swaps when interest rates were super low. Those swaps have been maturing, and we can see AGNC’s cost of funds drift upward.

This directly caused AGNC’s spread income per share to decrease over the past two years. In this chart, we can see AGNC’s net interest spread (Average asset yield – cost of funds) and how it translated into AGNC’s per/share earnings: Source

What does the recent Fed cut mean? Let’s look at how “cost of funds” is calculated: Source

We can see that AGNC’s repo costs were 4.44%. That number can be expected to come down very close to exactly as much as the Fed’s target rate. So a 25 bps cut will result in that number coming down about 25 bps.

TBA (To Be Announced) are futures, where AGNC simultaneously buys and sells future contracts maturing in different months, with the “interest rate” being the implied financing costs of the transaction. That rate is impacted by numerous factors, including the expectation of future rate cuts.

Then, the benefit of interest rate swaps is subtracted to arrive at the average cost of funds. Note that AGNC had $45.8 billion in swaps hedging $59.4 billion in borrowings.

The Fed’s 25 bps rate cut will immediately benefit the $13.6 billion in unhedged repo borrowings. 0.25% of $13.6 billion is $34 million in lower interest.

With the swapped portion, it is more complicated. AGNC has $8 billion in swaps where they are currently paying 0.17%, and those swaps are going to mature over Q3 and Q4: Source

If they don’t replace those swaps, they will be paying about 4.19% on the underlying repo after the Fed’s rate cut. That is better than 4.44%, but still a lot higher than the 0.17% they were paying. 4% interest on $8 billion is $320 million/year.

However, swap rates are also impacted by the expectation of Fed rate cuts. In the 5-10 year range, which is the sweet spot for agency mREITs, rates are currently 3.264%-3.541%. Source

Note, they were actually lower in 2024 when the market expected the Fed to be more aggressive with its rate-cutting cycle. AGNC will have the option of replacing its existing swap with a new one. If AGNC replaces the swaps, then they get a lower rate immediately than they are currently paying on their repo contracts. However, if the Fed does cut rates below 3.25-3.5%, then in the future they might be “overpaying”.

On the other hand, AGNC can just allow the swaps to expire and allow their interest expense to be unhedged. This would result in an increase to 4.19% today, but if the Fed cuts in October, it will be 25 bps lower. And their expense would be reduced directly with each cut.

This is a decision that AGNC will need to make as its swaps expire. It is important to note that through the end of 2025, the swaps expiring are going to have a larger financial impact than repo rates coming down. As calculated above, repo rates coming down will be a benefit of roughly $34 million per 25 bps in rate cuts. If we assume three rate cuts by year’s end, which is the consensus expectation, that would be roughly $100 million in savings.

On the other hand, the $8 billion in swaps that are paying only 0.17% now will be rolling off. If we assume 75 bps in repo cost reduction, they would still be paying 3.69% vs the current 0.17%, an increase of 352 bps. 3.52% of $8 billion is $281.6 million, or a $0.07/quarter headwind to earnings if AGNC goes completely unhedged. If AGNC chooses to enter into new swaps for some or all of the debt rolling off, the impact could be smaller.

So is the Fed rate cut good for AGNC’s cash flow? Yes. It does ultimately lead to AGNC paying less interest expense. However, we need to be aware that we aren’t going to see a huge spike in earnings from AGNC yet because they have these swaps maturing that have inflated earnings the past few years. That’s an approximately $0.07/quarter headwind, where each 25 bps fed rate cut is a $0.007/quarter tailwind.

AGNC has other tailwinds. For example, it can raise common equity at a premium to book value and issue preferred equity, and buy more new MBS. On a hedged basis, AGNC can easily deploy newly raised capital and generate a return on equity that is higher than its current dividend. At a high level, this works by increasing AGNC’s average asset yield, and higher revenues will also help offset the increase in interest expense as the swaps mature.

The bottom line is that declining rates are beneficial to AGNC, but we expect earnings in the near term will be relatively flat. We anticipate the tailwinds being generated by a lower Fed rate will primarily offset the maturity of the extremely favorable interest rate swaps, resulting in relatively flat earnings through the end of 2025. However, as we go into 2026 the pace of interest rate swap maturities is much slower, the swaps are already at a higher rate, and the Fed will have time to cut rates even more. As a result, the interest rate swaps that have restrained earnings growth in 2025 will be a much less relevant factor in 2026.

AGNC peers have been raising dividends, while AGNC has kept its dividends the same. This is largely because AGNC was already paying out a higher dividend relative to book value. The very attractive swaps it snagged in 2021 are a big reason why some peers had to cut dividends in 2022/2023, and AGNC didn’t. The swaps managed to last long enough to make it to an environment where AGNC can support its dividend without them.

To the extent that AGNC can continue issuing equity over book value and grow in 2026, dividend raises could be on the table within the next few years.

Conclusion

For AGNC, the benefit of declining rates or interest rate cuts is not an instantaneous proposition. Likewise, if you were to take a 3-mile run today, you would not instantly wake up with a perfectly sculpted body tomorrow. No, the benefit is cumulative over time. The more you run, the more the benefit. The longer you run, the greater the benefit. Likewise, for AGNC, as rates remain lower than before and continue to decline, the benefits will accumulate over time.

For traders who buy the rumor and sell the news, AGNC is going to move quickly into the category of no longer meeting any of their interests. This year, AGNC has strongly outperformed the market on the expectation of interest rate cuts, not that they’re here, we’re seeing traders exit their positions, bringing current returns closer to that of the overall market – traders locking in short-term gains:

For income investors who position their portfolio to benefit regardless of what interest rates are doing, AGNC continues to be a highly attractive opportunity to collect double-digit yields paid out monthly from ultra-safe investments in agency MBS. AGNC itself does add risk by adding in leverage to the scenario and so it does not carry the same ultra-low risk rating that Agency MBS would on its own. However, it is well-positioned to continue to benefit from additional interest rate cuts, as well as benefit from the newer, lower rate that we’ve just seen.

When it comes to retirement, collecting wonderful income that pours in from the market to your coffers is a great idea. Rarely does anything in life come for free, and with every time you put money to work, there’s going to be some risk that is tied to it. Even leaving money in a bank account has risk. Risk that the bank may collapse, risk that the government won’t honor its FDIC insurance, and the loss of value over time due to the eroding effects of inflation. Hiding your money under a mattress also comes with a risk of theft. If that cash is stolen, you can kiss it goodbye, and inflation still negatively impacts it there. By putting your money to work in the market, you can help balance that risk with reward by having your money earn more and be able to achieve the retirement that you’re dreaming of. Don’t let your finances be what stops you from having the retirement that you’ve always dreamed of. That’s where the unique Income Method within High Dividend Opportunities can massively benefit you by helping you unlock the potential of your nest egg.

That’s the beauty of my Income Method. That’s the beauty of income investing.

A Legit 13.7% Dividend with Unstoppable “Mob-Boss” Economics

SPONSORED AREA

Brett Owens, Chief Investment Strategist
Updated: October 1, 2025

In most US industries, banks help businesses finance their buildings. The lenders also provide working lines of capital for the operations to grow.

Cannabis is different. It is tricky for operators to find money due to federal roadblocks.

At the national level, cannabis is still illegal. However, 40 states have legalized the drug in some fashion. Uncle Sam mostly looks the other way and lets states regulate their own markets—except when it comes to banking and taxes.

Banks cannot lend to cannabis operators. So, good luck financing that building.

Also, there is a tax code relic of the 1980s war on drugs (“Just Say No!”) called IRC Section 280E. It blocks cannabis operators from deducting ordinary business expenses. Which means their profits are artificially low and access to credit is denied due to poor-looking books and federal laws.

But if you live in a state where cannabis has been legalized, you know there is plenty of money flowing. Obviously, there is no shortage of demand to fund the countless dispensaries that have popped up in recent years. Where do these weed businesses find the money?

The answer is Innovative Industrial Properties (IIPR), which acts as the first landlord and primary lender of choice for cannabis operators. IIPR is the capital lifeline for the industry. And it’s a dividend cash cow that yields 13.7%!

IIPR buys dispensary facilities from the operators who are often short on cash and remember, could not finance their buildings. In the transaction, IIPR hands them a chunk of cash they badly need. Then it leases the facility back to the operator for 15 to 20 years.

The operators receive money upfront. IIPR collects long-term rent checks. And shareholders snag a fat dividend.

Because traditional banks won’t touch the space, IIPR negotiates incredibly favorable leases. They have long durations, built-in rent escalators and guarantees from the large corporate multi-state operator-lessees.

IIPR is essentially a “Godfather landlord” in a restricted industry. Cannabis peddlers need cash and have nobody else to turn to. So, they take the deal.

These rents fund a dividend that has grown steadily since the company’s IPO in 2016. The first quarterly payout was $0.15 per share. Cannabis stocks have been volatile but IIPR’s payout has been a steady staircase higher to $1.90 per share, a 12-fold increase:

IIPR’s Blazing Dividend History

IIPR’s balance sheet is clean and its leverage is low. It is a reputable publicly traded company with “mob-boss” economics. IIPR has “Prohibition pricing power!”

Why doesn’t this company command more per share (and pay less?). The stock is unloved today because it was too loved before. IIPR delivered dynamite 1,620% returns from 2016 to 2021, climaxing in a bubbly valuation. Investors paid sky-high multiples—30X to 40X funds from operations (FFO)—for a REIT yielding 2%.

Then the air came out. The stock deflated 75% from its peak. Analysts fled and downgraded. Today only one analyst rates IIPR a Buy. (By comparison, more than 400 of the S&P 500 have a Buy label. Those analysts are certainly a cheery lot!)

Which is perfect for us careful contrarians. We have a hated stock with plenty of cash flow.

Today, IIPR trades for just eight-times FFO. This is quite cheap for a solid REIT. Thanks to its 13.7% dividend, a $50,000 position in IIPR pays almost $7,000 per year in cash income.

Dividend coverage is fine. The $230 million FFO haul keeps the payout flowing. More importantly, the stock looks frisky again to the upside. IIPR carved a bottom in the spring and, two months ago, bulls rejected another selloff attempt. Momentum is shifting.

Plus, IRC Section 280E is likely to be softened or removed in the coming years. Cannabis legalization has momentum at the state level. The federal restriction is a relic that, when repealed, will unlock tax relief and improve operator coverage ratios right away.

IIPR longs may not have to wait that long. The stock may pop on the next upgrade, with seven analysts as current holdouts. The bar is low and the yield stays sky high while we wait.

Deals like IIPR exist because Wall Street suits and mainstream financial advisors are unimaginative. Their jobs depend on herdlike mediocrity. So, they will lazily tell you that IIPR is risky—without doing any research about its leases, tenants or current cash flows!

We contrarians don’t care what the vanilla beans say, except as a signal to fade their groupthink. And that’s how I uncover hated high-yield opportunities like IIPR—the kind that can fund your retirement while Wall Street holds its nose.

This 7.6% Dividend’s New “Rights Offering” Lets Us Buy Cheap (for Now)

Brett Owens, Chief Investment Strategist
Updated: September 30, 2025

We contrarians live for the “one-off” shots at extra income (or gains!) our favorite dividend plays throw our way.

One of these “special situations” just landed in our lap: A shot at buying a megatrend-powered 7.6% dividend that’s rarely cheap. And we’re picking it up for a song.

It’s a long-time holding of our Contrarian Income Report advisory, and it’s sitting right in the tracks of the surging AI buildout. In fact, it may be the last “cheap” AI play on the board! This one’s dropped from trading for more than its portfolio is worth to a lot less.

A 7.6% Dividend Bargain We Haven’t Seen Since 2020 

As you can see, this fund dropped from trading 6% above its net asset value (NAV, or the per-share value of its portfolio) to 7.1% below, as of this writing.

It’s a huge drop, and it stands out because, as you can see above, this fund, the 7.6%-yielding Cohen & Steers Infrastructure Fund (UTF), is rarely cheap for long.

Rock-Solid 7.6% Dividends Rarely Get This Cheap, This Fast 

UTF’s latest tour in our Contrarian Income Report portfolio started in November 2020, and this reliable utility fund has been humming away since, handing us a 7.8% yield on our original buy, plus a monthly payout that’s rolled in like clockwork.

 Source: Income Calendar

That’s exactly what we bought it to do. And it’s handed us a 41% total return in that time, too. And now we have a shot at buying it cheaper than we did five years ago!

Let me put all of this in dollars and cents for you.

In the past year, UTF’s average premium has been 1.8%. If the discount reverts to that level, price upside of around 10% is on the table here. And that’s before we factor in the growth of its portfolio. Let’s talk about that now.

From Falling Rates to “Back Door” AI Gains

We bought UTF in late 2020 because its utility-stock holdings—including big players like NextEra Energy (NEE), Duke Energy (DUK) and Southern Co. (CO)—are essentially “bond proxies.”

When rates fall, as they did then, utilities rise. Nowadays, we have a similar setup. As we discussed in last week’s article on some of our favorite gold dividends, long rates are essentially capped, and short-term rates (controlled by the Fed) are falling.

Plus we have another, far bigger driver: AI’s limitless power demand.

Let’s take Texas, ground zero for the AI power boom. Microsoft (MSFT), Alphabet (GOOGL), Amazon.com (AMZN) and Meta Platforms (META) have built data centers there. According to the Electric Reliability Council of Texas (ERCOT), Texas alone expects a 62% surge in power demand by 2030 as these data centers multiply.

That’s just one state, utilities nationwide are racing to add capacity.

The Deal on the Discount

To be sure, this AI-utility trade is far from a secret, so why the discount on UTF?

Look at the chart below. In orange, we have UTF’s total NAV return (again, the value of its underlying portfolio) for 2025. In purple we see its total return based on market price (or what investors are paying for the fund itself on the open market).

A Contrarian-Friendly Setup: NAV Climbs, Price Sags

As you can see, the total NAV return has continued its climb. The market-price return, meantime, has dropped, carving out that 7.1% “discount gap.”

This is the kind of sign we contrarians love because it shows that this discount is not because management blew a stock selection (or many). It’s all about investor sentiment. And we’re happy to take the other side of the bet when investors turn bearish on a solid fund like this one.

Why the sour mood? UTF’s management firm, Cohen & Steers, is doing something CEF managers rarely do: conducting a “transferable rights offering” on the fund.

Under this setup, if you held shares of UTF as of the “record date”—September 22—you get one “right” to buy new shares at a discount: Every five rights lets you buy one new UTF share.

Here’s how that will work:  When the offer expires on October 16, the price of the new shares will be set at 95% of the stock’s average closing price on that date and the four trading days leading up to it. If the fund’s average price is below 90% of its NAV—again, the per-share value of its underlying portfolio—the price will be set at 90% of NAV.

That “floor” helps limit the offer’s downside pressure on the shares.

If you owned UTF as of September 22, you’ll be able to exercise your rights and even more, if there are leftover shares other investors don’t pick up. If you don’t want to get in on the action here, that’s fine—you can sell your rights—hence the “transferable” in the name. All of the details of the rights offering are on C&S’s website.

All of this, in a nutshell, is why UTF has dropped to a discount.. But how do I know this is a buying opportunity?

Let’s look at history. I did say earlier that rights offerings were rare for CEFs, but on March 19, Nuveen announced a similar deal on its Nuveen Credit Strategies Income Fund (JQC).

JQC’s Rights Offering Sets the Bar for UTF

JQS’s discount deepened on the offer’s announcement, then ground back toward its norm when the expiry date rolled around. I expect the same with UTF’s AI tailwind, capped interest rates and management’s ability to sniff out winning infrastructure plays. And thanks to the rights offering, they’ll have even more cash to work with.

If you own UTF, this is your chance to buy more at a bargain. If not, you still get to buy a rarely cheap fund for 93 cents on the dollar—and ride its closing “discount gap” higher.

Start With UTF’s Rare Discount, Then Buy These Cheap 9% Monthly Payers

Special situations like this put us “over the top” when it comes to retirement, putting a pop in our portfolios (and income streams) that regular investors can only dream of.

That’s right: Most people never see these opportunities. Stuck in mainstream stocks, they settle for meger payouts and sky-high valuations.

Why performance matters for valuation.

Story by Max King

Why do two ostensibly similar real estate investment trusts (Reits) trade at such different valuations? AEW UK Reit (LSE: AEWU), with net assets of £174 million, invests in “UK commercial property assets in strong locations” nearly all outside London. Its shares trade on a 4% discount to net asset value (NAV) and yields nearly 8%.

Conversely, Regional Reit (LSE: RGL), with net assets of £362 million, invests in “high quality commercial properties outside of the M25 motorway”. Its shares yield 7.3% but trade on a discount of 44% – even though, as the larger trust, its shares ought to be more liquid.

Part of the answer is down to performance. AEW seeks to buy “mispriced assets” and to apply “active management” to “grow income, lengthen and improve tenant leases, add value using the planning system and refurbish, where needed”. A five-year investment return of 70%, compared with a property sector index of -5%, shows it has succeeded. Meanwhile, RGL’s NAV is down 74% over five years and 70% over three years.

RGL has been less prudent. It has net debt of £260 million, equal to 42% of portfolio value. A disposal programme of 40 properties with a book value of £106 million – partly offset by capital expenditure of £24 million – would cut that to 29%. However, this follows a distressed share issue at 10p in mid-2024, which raised £110 million but heavily diluted the NAV.

The proceeds enabled RGL to repay a £50 million bond, which was about to mature – debt having reached 57% of portfolio value. Following this, there was a one-for-ten share consolidation. The issue was underwritten by Steve Morgan, the founder of housebuilder Redrow. This has left Morgan’s companies with 22% of the shares in issue.

Which Reit to choose?

There is less rental upside in AEW’s portfolio – just 9% – but management expects recent acquisitions and planned asset management initiatives “to result in stronger returns in the future.” With 34 properties and 129 tenants, it is more focused than RGL, even taking into account its smaller size, and the portfolio is more diversified.

The current market is “the greatest buying opportunity we have seen in the ten-year life cycle of the company but, perhaps, a less good time to be selling”, says Laura Elkin, AEW’s lead manager. “There is more mispricing in the market, which is absolutely what we want to see, enabling us to buy properties out of line with their long-term fundamentals and then actively manage them.”

For investors, the choice is between a Reit with a great record and good prospects at a price that reflects those factors, and one which is very much a recovery bet with plenty of upside but higher risk.

As its the final quarter it’s possible to arrive at an income figure for the end of the year.

Dividends earned £11,493.00. Some of the payments may slip into 2026 and also includes a special dividend from VPC.

Next years fcast £9,817 and the target 10k.

Results analysis: Octopus Renewables Infrastructure

ORIT’s five-year plan for higher returns.

Alan Ray

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Octopus Renewables Infrastructure (ORIT). The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

• Octopus Renewables Infrastructure’s (ORIT) half year results to 30/06/2025 show a NAV total return of -0.2% (H1 2024: +2.0%). The lower NAV per share, 99.5p (31/12/2024: 102.6p) mainly resulted from lower power price forecasts, higher discount rates and dividend payments, partially offset by macro factors (e.g. higher UK RPI inflation, lower corporation tax in Finland).
• ORIT’s dividend yield is c. 9.6% (as at 21/09/2025). In the first half dividends totalling 3.08p were on track to achieve the full year target of 6.17p. The target dividend represents a 2.5% increase on 2024’s 6.02p and, in attaining, would extend ORIT’s record of increasing dividends in line with UK CPI inflation to four years . First half dividend cover was 1.19x operating cashflow.
• Revenue of £68.7m and EBITDA of £44.3m were broadly flat year-on-year, although note that in the FY to 31/12/2024 revenues and EBITDA increased by 12% and 16% respectively. 85% of revenues are fixed over the next two years and 47% are linked to inflation for the next ten years.
• ORIT generated 654 GWh of clean electricity (H1 2024: 658 GWh). In a year when wind speeds were lower, ORIT’s diversified strategy demonstrated its value, with an offsetting 34% increase in solar output. This output is equivalent to powering an estimated 158k homes with clean energy (H1 2024: 147K).
• ORIT was geared 47% LTV at the end of the period (89% as a percentage of NAV), a slight increase from 45% at 31/12/2024. The increase was a result of both slightly lower valuations and the impact of share buybacks, both reducing net assets. The board has restated the target to reduce gearing to 40% or less by the end of the financial year.
• A new five-year term loan facility allowed for the repayment of £98.5m of short-term borrowings through the Revolving Credit Facility (“RCF”). The remaining £150m RCF’s term was extended to June 2028. The average cost of debt decreased to 3.6%, from 4.0% as at 31/12/2024. Resulting savings are expected to be c. £850,000 (or 0.15 pence per share).
• Under ORIT’s capital allocation policy, a total of £21.6m (to 15/09/2025) of the £30m targeted share buybacks have been executed. The asset disposal process is on track to deliver £80m of sale proceeds by year end. Selective investments continued, with a total of c. £4.3m of follow-on funding for two of ORIT’s developers and a conditional forward purchase agreement for a price of c. €27m to acquire a sixth site at ORIT’s existing Irish solar complex, Ballymacarney, with completion expected in H2 2026.
• The portfolio’s weighted average discount rate (WADR) increased to 7.9% (31/12/2024: 7.4%), largely due to market conditions, and informed by observed transactions in renewables assets. The introduction of project level debt for UK assets (which replaced some of the more expensive RCF) also contributed to the increase.
• Post period end, ORIT’s board agreed a change in management fees with the manager. Effective 01/11/2025, management fees will be charged on an equal weighting of net assets and average market cap, which at prevailing levels equates to an annualised cost saving of c. £0.7m.
• The board separately announced its ‘ORIT 2030’ strategy, which sets out its four priorities for the next five years.
  • Grow: Invest for NAV growth, deploying capital into higher growth investments, including an increased ~20% target allocation to construction assets, maintaining the current 5% allocation to developers. There will also be a greater focus on asset improvement and disciplined capital recycling.
  • Scale: Target £1 billion net asset value by 2030, to create a more liquid and investable company. Alongside investment growth, this could include corporate M&A.
  • Return: Target medium-to-long-term total returns of 9-11% through a combination of capital growth and income, maintaining the progressive dividend policy, while preserving full cover and targeting long-term gearing below 40%. Retain diversification across core technologies and geographies.
  • Impact: Aim to build approximately 100 MW of new renewable capacity per annum.
• As part of the ORIT 2030 strategy, the board is also recommending that the continuation vote moves to a cycle of every three years, from the current five. The change will be put to a vote at the 2026 AGM, with the next continuation vote then held at the 2028 AGM.
• Phil Austin, chair, said: “ORIT 2030 marks the next phase in the Company’s development. This clear five-year strategy aims to scale ORIT significantly, drive NAV growth through investment into construction and development assets and – underpinned by resilient cash flows – maintain progressive fully-covered dividends.
• “More than 90% of shareholders backed the Company at its continuation vote in June, indicating strong support for ORIT’s future, yet it has also been made clear from our active dialogue with investors that they want the Company to become larger, more investable and to stay true to its purpose. ORIT 2030 addresses this directly with a plan that balances yield, growth and impact, ensuring the Company delivers for shareholders, while supporting the energy transition.
• “With disciplined capital management and the expertise of our Investment Manager, we believe we are well placed to execute ORIT 2030 and to pursue our ambition of building a £1 billion renewables vehicle by 2030.”

Kepler View

As we’ll see further below, Octopus Renewables Infrastructure’s (ORIT) current yield spread over UK 10-year gilts is at a lifetime high, making this a good moment for investors to examine its investment proposition more closely. And while the ‘ORIT 2030’ strategy is clearly meant as the centrepiece of the results, with a separate simultaneous announcement, it’s worth reflecting on some key points of the results themselves. The first of these is the practical demonstration of ORIT’s diversification strategy. In the geography that ORIT covers, wind speeds this year are already known to have been lower, so it is no surprise that ORIT has reported lower output from its wind assets. But wind speed tends to have an inverse correlation to solar output and ORIT’s solar output, up 34%, confirms this, offsetting the lower output from wind. This is a good demonstration of why power grids need different sources of energy generation, and why a trust such as ORIT, targeting a progressive dividend, is assisted by diversification. It’s also notable that ORIT’s short-term debt has partly been replaced with a term loan secured against UK assets, reducing the overall interest cost from 4.0% to 3.5%. If the goal to realise £80m of assets by the year end is achieved, then we can expect a further reduction in the remaining £150m of RCF, which would reduce the overall debt cost further. The revised management fee will also be an incremental cost saving.

The two most immediately practical elements to the strategy in the ‘ORIT 2030’ roadmap are the defined target allocation of owning c.20% in construction assets, and the accompanying increase in the trust’s return targets. It’s worth noting that these do not reflect a change to the investment policy itself. ORIT’s manager has a long track record of asset construction dating back to 2011 and has over 150 professionals with experience at all stages of managing renewable energy infrastructure assets, so this change plays to the inherent capabilities of Octopus Energy Generation. Within ORIT the case study that best illustrates this is the 2024 sale of its fully operational Swedish wind assets for c. €74m, having acquired the assets pre-construction in 2020, with a resulting IRR of 11%.

The focus on reducing costs, noted above, will be important in achieving one of the other goals, to maintain the progressive dividend. Clearly, as ORIT slowly increases to ~20% exposure to non-income producing assets in future, this will mean the balance has to work that much harder. The management team notes that dividend cover will be an important consideration in the decision process to recycling assets, which in simple terms means that lower yielding assets are more likely to be sold and proceeds recycled into construction. The company also reiterated its commitment to a progressive dividend, noting that while increases may not always track CPI in future, this has been achieved in practice, despite never being a formal policy. Further, the revised fee structure, partly calculated on market cap, means the manager’s fee is reduced when there is a discount, aligning the manager’s interests more closely with shareholders. One of ORIT’s other ambitions is to act as a consolidator in its peer group and it seems very likely that earnings enhancement will be a key consideration in the pricing of any M&A transactions that result from this ambition.

Coming back to the present, the chart below shows ORIT’s dividend yield as a spread over 10-year gilts. UK government bond yields have not been playing nice with interest rates this year and are approaching 5%, which accounts for a good deal of the recent price weakness for ORIT, its peers and indeed many other rate-sensitive ‘alternatives’. But as the chart below shows, the spread over gilts is close to a lifetime high for ORIT. With a set of proposals that reduces costs, puts more alignment between the manager and shareholders in terms of addressing the discount and which plays to the manager’s strengths as an experienced constructor and operator, as well as increasing the frequency of continuation votes, we think ORIT’s discount of over 30% seems excessively pessimistic.

YIELD SPREAD OVER GILTS

Analyst’s View

ORIT has no direct exposure to the US, where a significant policy shift away from renewables is underway, and is invested across a range of countries that maintain a very constructive approach to renewables. Indirectly, the team reports that equipment supply chains are not affected by tariffs, as generally, the US does not export equipment involved in renewables. Conversely, supply chain pressures could ease if the US imports less. Consequently, the team see the US’s position as, at worst, neutral for ORIT.

In the Dividend section, we show how ORIT’s average asset life has increased from 28 to almost 30 years over the last four years through active management, which is crucial for maintaining and increasing dividend cover over the long term. This gives us further reassurance that the progressive dividend policy can be maintained in the future.

The US is, however, weighing heavily on wider investor sentiment, not least because it clouds the picture for interest rates and inflation, and the knock-on effect for ORIT and its peer group is a continuation of the wide discount. In response, ORIT’s capital allocation policy includes an expanded £30m share buyback programme and a reduction in total debt, funded by asset disposals at or above NAV. These have demonstrated the team’s ability to move a project from pre-construction, through to operation, to generate returns above the trust’s targets. If the very wide discount continues to narrow, investors could achieve returns considerably higher than this.

Bull

• Diversification provides quantifiable benefits to power output
• An 8% yield backed by a covered dividend growing in line with inflation
• Robust capital allocation policy enacted to address the discount

Bear

• Investor sentiment toward listed renewables is weak
• Capital allocation policy reduces ORIT’s ability to acquire new operational assets
• Gearing can amplify losses as well as gains

UIL leaves the watch list as the yield is now below 6%

These 50%+ “AI Dividends” Could Ruin Your Retirement

by Michael Foster, Investment Strategist

What if you could squeeze, say, a 70% dividend yield from a fast-growing AI stock like NVIDIA (NVDA) or Palantir (PLTR)?

Sounds great, right?

Instead of relying just on these stocks’ prices for your profits (since dividends are, frankly, the furthest thing from their CFOs’ minds), you get their returns as high-yielding dividends.

That’s something a new breed of ETFs is promising. These funds, which are gaining in popularity, hold just one stock – usually a Palantir, Tesla (TSLA) or NVIDIA – and trade options on that one stock to deliver stated yields often way above 50%.

Does it work?

First, let me say that, as someone who has covered 8%+ yielding closed-end funds (CEFs) for over a decade, I get the sentiment behind these funds. Big income streams can create financial independence – who wouldn’t want as big of a yield as possible?

But there’s a line where a dividend goes from appealing to dangerous – and it’s well below the stated 70% distribution rate, as of this writing, on a single-stock ETF like, say, the YieldMax AI Option Income Strategy ETF (AIYY).

That’s because, what these funds’ massive yields give, their share prices can easily take away.

Consider the YieldMax AI Option Income Strategy ETF (AIYY), which aims to deliver that 70% income stream by holding C3.ai (AI), a developer of AI apps for business. As I write this, AIYY investors have seen a total return of nearly negative 50% since the start of the year.

70% Dividend Doesn’t Help AIYY Investors

With nearly half of their capital now lost in 2025 (with dividends included), those holding AIYY must be wondering what went wrong.

Let’s start with that dividend, because there’s a key thing to note here: Even though AIYY’s website says its distribution rate is 71%, it also tells us that the fund’s 30-day SEC yield is only 4.8%. This means the fund’s net investment income (which can only be calculated by a strict SEC-mandated formula and excludes options income, which can be unpredictable) is much lower than that 70% – which is the payout as a percentage of the fund’s assets.

Moreover, AIYY’s distributions keep falling, down 63% in 2025.

Huge Yield, But Shrinking Payouts

Let me clear – not all of YieldMax’s 57 ETFs are losing money this year. In fact, most are up. The best return goes to the YieldMax PLTR Option Income Strategy ETF (PLTY), with a stated 49.4% yield. This fund has returned 77.9% for 2025 and is up much more since its inception in late 2024.

PLTY Explodes Out of the Gate

So, have we found the secret to financial independence here? After all, with this 49.4% income stream, it takes only about $203,000 in upfront investment to get a six-figure income stream!

Except, well, there’s a lot of risk behind this seemingly impressive chart.

As you probably guessed from the fund name, this ETF tracks Palantir, whose stock has surged as the company wins more government contracts. If you predicted PLTR’s surge, congratulations – that’s impressive. But an investor who knew to invest in PLTR should’ve just bought that stock instead, since PLTY (in purple below) has badly lagged it.

Palantir Tramples the Single-Stock ETF That Tracks It

This problem is endemic to single-stock ETFs: These funds try to “translate” growth stocks’ gains into big dividends, but in so doing expose us to the risks of a single stock, with less upside.

Sure, the income is great when the stock is rising, but that income will shrink if the stock drops. That’s what happened to the 56.2%-yielding YieldMax MRNA Option Income Strategy ETF (MRNY), which holds Moderna (MRNA) and is down 39% in 2025 and down even more since its IPO in early 2024.

MRNY’s 40%+ Dividend Yield Can’t Save Its Stock

Anyone who bought MRNY and enjoyed the huge yields at the start of 2024 probably thought they were really on to something, as the fund’s total return rose into the spring. They then saw their fortunes reverse as the fund’s price fell.

That’s the fate I expect for the aforementioned PLTY if the stock it tracks – again, Palantir – drops. And I see that as likely, since Palantir’s forward price-to-earnings (P/E) ratio is at a stratospheric 278 as I write this.

So what are these funds for, then? To be honest, I’m not sure. As we’ve seen, investors are almost always better off just buying the underlying stocks.

What’s more, some of these ETF issuers are venturing into even riskier territory, like the recently released ” Bonk Income Blast ETF,” which doesn’t just invest in crypto, but also in “other crypto ETFs, including non-US crypto-ETFs,” according to its SEC filing.

This means investors will wind up paying the fees for this ETF, as well as fees for the ETFs it owns. Plus they’re exposing themselves to the risks of the crypto market and the risks of foreign markets – including potentially lax regulation – too.

There’s just no reason to take risks like those when you can get predictable, diversified dividends from CEFs. Sure, CEFs don’t offer the mind-blowing yields of YieldMax and its ilk. But we’ll happily take that “lower” payout – bearing in mind many CEFs yield more than 8%, if it lets us sleep peacefully at night. Moreover, we benefit from CEFs discounts to net asset value (NAV, or the value of their underlying portfolios), which hold the potential for future upside. ETFs – single stock or no – never offer us a discount.

I think you’ll agree that this is a far better deal than a 70%-yielder that’s dropped around 50% in less than a year.

Bargain Alert: These 8.2% Payers Get You BIG Dividends From AI (the Right Way)

I hate to see investors take massive risks like these when there’s a much safer way to get a high payout from the AI megatrend.

Like our approach. Right now, we’re buying 4 bargain-priced CEFs paying 8.2% on average. These stealth income plays hold smartly built, diverse portfolios of AI stocks – they’re head-and-shoulders above treacherous “one-stock” plays like PLTY.

Critically, these 4 funds hold shares of both AI developers and companies putting this breakthrough tech to work in their everyday businesses. That’s critical because it gives us a piece of the action as AI slashes these companies’ costs, boosts their sales and helps them get more out of each and every employee.

And because they’re overlooked bargains, these 8.2%-paying funds let us buy their portfolios for less than we could if we bought each of their holdings individually.

These were the most-bought active and passive funds on Interactive Investor during September:

Header Cell – Column 0	Active Open-Ended Fund	Index Fund or ETF
1	Royal London Short Term Money Market Fund | Acc	iShares Physical Gold
2	Artemis Global Income | Acc	Vanguard LifeStrategy 80% Equity
3	Ranmore Global Equity Institutional	L&G Global Technology Index Trust
4	Jupiter Gold & Silver	Vanguard S&P 500 UCITS ETF | Acc
5	Royal London Short Term Money Market Fund | Dis	Vanguard S&P 500 UCITS ETF | Dis
6	Orbis OEIC Global Balanced	HSBC FTSE All World Index
7	Artemis Global Income | Dis	Vanguard Global All Cap Index
8	Artemis SmartGARP European Equity	iShares Physical Silver
9	Ninety One Global Gold	Vanguard LifeStrategy 100% Equity
10	Vanguard Sterling Short-Term Money Market	Vanguard LifeStrategy 60% Equity

^{Source: Interactive Investor.}

The gold rush is especially noticeable in the top funds and ETFs list, with iShares Physical Gold ETC (LON:SGLN) jumping from third to first place in the list of top passive funds and Jupiter Gold and Silver Fund jumping from sixth to fourth.

“In September, a key trend was increased demand for precious metals,” said Caldwell. “There were two new entries: Ninety One Global Gold and iShares Physical Silver (LON:SSLN).”

September’s top investment trusts for DIY investors

These were the most-bought investment trusts among DIY investors on Interactive Investor during September:

Header Cell – Column	Investment Trust
1	Scottish Mortgage
2	Greencoat UK Wind
3	City of London
4	Polar Capital Technology
5	Temple Bar
6	Fidelity China Special Situations
7	JPMorgan Global Growth & Income
8	F&C Investment Trust
9	International Public Partnership
10	Murray International

^{Source: Interactive Investor.}

Technology investment trusts like Polar Capital Technology and Scottish Mortgage (LON:SMT) remain popular choices, but there are signs that DIY investors are looking less exclusively at growth-oriented investment trusts.

“Another trend gaining greater prominence is investors turning to funds that have a value style,” said Caldwell. Murray International (LON:MYI) is a new entrant to the table that reflects this value focus.

“This suggests that some investors are seeking greater diversification in their portfolios, perhaps mindful of the concentration risk attached to the US stock market,” said Caldwell.