If you like ultra-high-yield stocks, then AGNC Investment (NASDAQ: AGNC) and its over 14% dividend yield will probably be on your radar screen. However, when yields get this high you need to step back and make sure you really understand the story behind the company before you buy it. AGNC's story isn't all bad, but it probably isn't the right tale for investors trying to live off of their dividends. Here's what you need to know.

AGNC is not your typical REIT

Real estate is in the name real estate investment trust (REIT), a special type of corporate structure that lets companies pass income on to investors without paying corporate taxes. The intent of the REIT structure is to give small investors the chance to buy into institutional level properties. All in, REITs often are a great option for dividend focused investors.

However, not all REITs are equal. That is particularly true when you bring in a REIT like AGNC Investment. It buys mortgages that have been pooled into bond-like securities, often called something like a collateralized mortgage obligation (CMO). That's not the same thing as buying a physical property, even though AGNC is offering access to institutional-level real estate investments (the CMOs it buys). Mortgage REITs are more like mutual funds than operating companies.

The mortgage REIT sector is fairly complex. For example, interest rates can have an extreme impact on mortgage bond prices. Rates can also impact property markets, which can lead to shifts in the availability of mortgages to be turned into CMOs. In addition, interest rates can impact the rate at which mortgage holders pay down their mortgages, another unique aspect of the CMO puzzle. And since CMOs trade all day, these factors all get priced into the securities on a minute-by-minute basis. As if that weren't enough, most mortgage REITs use debt, often with their CMO portfolio as collateral, which can both enhance returns and increase risk.

This is not a sector that most small investors should be looking at unless they are willing to really dig in and get to understand the mortgage REIT niche very well. And then you can start to look at individual stocks.

Total return over dividends

But the truth is that mortgage REITs like AGNC aren't really meant for small investors. They are designed as total return investments, which assumes dividend reinvestment, that can be used by institutional investors using an asset allocation framework. That's neither good nor bad, but it is very different from an investor who is looking to live off of the dividends they generate from their portfolio.