NLY dividend – Investors Beware: Annaly Capital’s Common Stock is a Dividend Trap, Preferreds are the Better Choice
December 21, 2023
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Investors looking for a steady dividend should take a second look at Annaly Capital Management ($NYSE:NLY). While the company’s common stock may offer a tempting dividend yield, they are more likely to be a “dividend trap” than a secure investment. In comparison, Annaly Capital’s preferred stock offers a much more reliable and secure option for investors hoping for a reliable source of income. Annaly Capital Management is a real estate investment trust (REIT) which specializes in investing in mortgage-backed securities. The company’s business model involves aggregating funds from investors and then taking advantage of the mortgage market to create a steady stream of income. Common stocks are often thought of as the most attractive form of investment, offering the potential for capital appreciation as well as dividend payments. The stock pays a high dividend yield due to the company’s strong financial position, but the payments are not guaranteed and may be reduced or eliminated at any time as the company’s fortunes change.
In contrast, Annaly Capital’s preferred stock offers a much more reliable and secure option for investors. Moreover, unlike common stock dividends, preferred dividends are fixed and do not fluctuate with the company’s fortunes. This makes them a much better choice for investors looking for a steady source of income. Investors looking to get the most from their money should keep Annaly Capital’s common stock away from their portfolios and instead consider the company’s preferred stock option. With its higher dividend rate and more reliable payments, preferred stock can be a safer and more rewarding investment choice.
Dividends – NLY dividend
Investors looking for an opportunity to earn dividends should consider Annaly Capital Management. In the last 3 years, the company has issued an annual dividend per share of 2.83, 3.52, and 3.52 USD respectively. Dividend yields for 2021 to 2023 are estimated to be 14.19%, 13.68%, and 9.94% respectively, with an average dividend yield of 12.6%. As such, investors looking for a way to generate income through dividends should consider Annaly Capital Management as a viable option.
However, it is important to note that while the company’s common stock offers a good dividend yield, its preferred stocks may be a better choice, as they offer higher yields and are generally less volatile than common stocks. Therefore, investors should be aware of the risks associated with investing in Annaly Capital Management and should ensure they are making an informed decision when deciding if the company is right for their portfolio.
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for NLY. More…
| Total Revenues | Net Income | Net Margin |
| -1.96k | -2.26k | – |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for NLY. More…
| Operations | Investing | Financing |
| 2.77k | -14.53k | 9.39k |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for NLY. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 89.65k | 78.97k | 18.25 |
Key Ratios Snapshot
Some of the financial key ratios for NLY are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| – | – | – |
| FCF Margin | ROE | ROA |
| – | – | – |
Price History
Investors should be aware of the possible risks associated with investing in Annaly Capital Management’s common stock. On Wednesday, ANNALY CAPITAL MANAGEMENT stock opened at $20.2 and closed at $20.0, down by 1.0% from previous closing price of 20.2. This indicates that the stock is not performing well and investors should be cautious when considering investing in it.
Additionally, Annaly Capital Management’s preferred stock is a much better option than its common stock. Furthermore, preferred stockholders have priority over common stockholders in the event of a liquidation or other corporate reorganization. Overall, investors should be wary of investing in Annaly Capital Management’s common stock as it is currently performing poorly. Instead, investors should consider investing in the company’s preferred stock as it offers higher yields and more security than the common stock. Live Quote…
Analysis – NLY Stock Fair Value Calculator
At GoodWhale, we help investors to analyze the fundamentals of ANNALY CAPITAL MANAGEMENT using our platform and tools. Our proprietary Valuation Line helps in finding the fair value of a stock and according to our analysis, it is estimated that ANNALY CAPITAL MANAGEMENT share is worth about $14.6. However, presently the stock is trading at $20.0 per share, which reflects an overvaluation of 37.1%. Therefore, one can consider investing in ANNALY CAPITAL MANAGEMENT if the price drops to its fair value. More…
Peers
Annaly’s primary business objective is to generate net income for distribution to its shareholders from its portfolio of mortgage assets. Annaly is managed and advised by its subsidiaries, Annaly Management Company LLC and Hollister Asset Management LLC. As of December 31, 2018, Annaly had equity investments in 97 real estate investment trusts (“REITs”) and 12 companies that are engaged in the business of owning and operating real estate assets (the “Operating Companies”). AGNC Investment Corp., Dynex Capital Inc., Chimera Investment Corp., and Annaly Capital Management Inc. are all companies that invest in mortgage assets in the United States. These companies all have different strategies and focus on different aspects of the market, but they all aim to generate income for their shareholders.
– AGNC Investment Corp ($NASDAQ:AGNC)
AGNC Investment Corp is a real estate investment trust that invests primarily in residential mortgage-backed securities. The company has a market cap of 4.37B as of 2022.
– Dynex Capital Inc ($NYSE:DX)
Dynex Capital Inc is a mortgage real estate investment trust that invests in and manages a portfolio of mortgage-backed securities. As of December 31, 2020, the company’s investment portfolio totaled $9.6 billion. The company has a market cap of $511.5 million as of March 2021. Dynex Capital Inc is headquartered in New York, New York.
– Chimera Investment Corp ($NYSE:CIM)
Chimera Investment Corporation is a real estate investment trust that focuses on investing in and managing a portfolio of residential mortgage assets, including agency residential mortgage-backed securities, non-agency residential mortgage-backed securities, and other mortgage-related investments. As of December 31, 2020, the company owned and managed a portfolio of approximately $32.6 billion in residential mortgage assets.
Summary
Investing analysis of Annaly Capital Management suggests that common stock is not a great dividend-earning option, as yields are relatively low. Instead, it is recommended to invest in preferred stock, as it provides higher yields and greater potential for capital appreciation. Annaly has a long history of paying dividends and offers a portfolio of investments focused on mortgage-backed securities and other debt instruments.
Its portfolio structure is highly flexible and allows for changes in the mix of investments to take advantage of market opportunities. Annaly offers both fixed- and variable-rate investments, allowing investors to choose a strategy that meets their individual needs.
