Key Takeaways Annaly expanded its Agency portfolio by nearly $3 billion to $95 billion in market value.NLY purchased $7.1 billion of loans in Q2, with Residential Credit at $10.4 billion.Annaly's MSR portfolio held $4.1 billion in market value as it grew its seller network. Annaly Capital Management, Inc. (NLY - Free Report) emphasized the strength of its diversified housing finance platform on its second-quarter 2026 earnings call, with management focusing on disciplined capital allocation, conservative leverage and opportunities across Agency securities, Residential Credit and mortgage servicing rights.
Executives highlighted continued dividend coverage, portfolio growth and selective deployment of new capital while addressing macro uncertainty, rate volatility and investor questions around future allocation priorities.
NLY Emphasizes Diversified PlatformCEO and co-chief investment officer David Finkelstein said that the company delivered a 5.5% economic return in the quarter while maintaining conservative economic leverage of 5.6 times. He noted that earnings available for distribution exceeded the dividend for the ninth consecutive quarter, supporting the increase in the quarterly common dividend to $0.75 per share.
NLY reported earnings available for distribution of $0.79 per average common share, beating the Zacks Consensus Estimate of $0.75. Revenues were $488.2 million, missing the Zacks Consensus Estimate of $509 million.
Management stated that portfolio positioning remained focused on balancing attractive returns with risk control as interest rate uncertainty continued. The company ended the quarter with a 97% hedge ratio and maintained a conservative approach to managing rate exposure.
Annaly Expands Agency PortfolioAnnaly increased its Agency portfolio by nearly $3 billion during the quarter, bringing the portfolio to $95 billion in market value. Finkelstein added that Agency capital allocation increased to 57% as the company invested newly raised capital into higher-coupon TBA securities and specified pools.
Management said that Agency spreads benefited from stronger technical conditions, including fixed-income inflows, overseas investor demand and activity in the collateralized mortgage obligation market. The company also adjusted its portfolio by reducing exposure to certain lower-coupon securities and adding higher-coupon opportunities.
Annaly’s executives highlighted continued focus on managing prepayment risk through portfolio construction. They said that specified pools remain an important tool for adding call protection while maintaining flexibility across Agency investments.
NLY Targets Residential Credit GrowthFinkelstein stated that Residential Credit remained an area where the company sees attractive risk-adjusted opportunities. The portfolio ended the quarter at $10.4 billion in market value and represented 22% of dedicated capital.
Michael Fania, co-chief investment officer and head of residential credit, said that Annaly purchased $7.1 billion of loans during the quarter, supported by its correspondent channel and whole loan relationships. He highlighted the company’s expanded sourcing network and operational infrastructure as key advantages.
Fania added that credit quality remained strong, citing a lock pipeline with a 765 FICO score and 67% combined loan-to-value ratio. He said that the company remains disciplined on pricing and return targets despite increased market competition.
Annaly Builds MSR FlexibilityAnnaly’s Mortgage Servicing Rights portfolio remained relatively stable at $4.1 billion in market value, representing 21% of dedicated capital. Management said that the business continued to benefit from its operating-light structure and use of sub-servicing partners.
Ken Adler, head of mortgage servicing rights and portfolio analytics, said that the company’s model allows it to participate in MSR transactions without the same operational requirements as traditional servicers. He noted that this structure supports flexibility when sourcing assets.
Adler also highlighted growth in the flow purchase channel, saying the company has expanded its seller network and uses detailed pricing analytics to evaluate MSR opportunities.
NLY Addresses Capital AllocationDuring Q&A, a Piper Sandler analyst asked where incremental capital would be deployed across the company’s three strategies. Finkelstein said that Residential Credit offered strong opportunities, while Agency investments remained attractive because of favorable market conditions.
Finkelstein added that the company’s recent capital raises were designed to support growth in Residential Credit and MSR while maintaining disciplined valuation standards. He noted that capital raised over the prior two years helped expand these businesses.
A UBS analyst asked about mortgage spreads and market uncertainty. Management responded that low volatility, strong demand and supply conditions were key factors influencing the current investment environment.
Annaly Maintains Strategic FocusAnnaly entered the second half of 2026 focused on selective growth across its three investment strategies. Management emphasized scale, liquidity and capital discipline as central components of its approach.
The company ended the quarter with $9.6 billion of assets available for financing, including cash and unencumbered Agency mortgage-backed securities, providing additional financial flexibility.
Executives continued to prioritize opportunities where the company can deploy capital while maintaining conservative risk controls and supporting earnings distribution.
NLY’s Zacks Rank and Style ScoreNLY carries a Zacks Rank #3 (Hold) at present, which indicates that the stock’s current earnings estimate revision trend is consistent with a neutral outlook. The Zacks Rank can change as analysts update earnings estimates following quarterly results. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The stock has a Value Score of C, a Growth Score of F, a Momentum Score of A and a VGM Score of D. The Zacks Style Score evaluates value, growth, momentum and combined characteristics, with higher grades indicating stronger attributes within each style category.
Annaly Capital Management (NLY -0.80%) towers above most dividend stocks. The real estate investment trust (REIT) currently has a dividend yield of more than 12.5%. That's over 10 times higher than the S&P 500's current yield of around 1.1%.
A double-digit dividend yield is usually a bright red flag for income investors. However, that's not the case with the mortgage REIT's big-time payout. That's because the one metric that matters most for its dividend continues to top its payout.
Image source: Getty Images.
It's all about Annaly's EAD Investors need to shift their focus when evaluating a REIT's financial results from reported net income to its underlying earnings. That metric can vary by REIT, as some use funds from operations (FFO) while others use an adjusted earnings metric. For Annaly, the metric that matters most for its dividend is its earnings available for distribution (EAD).
During the second quarter, the mortgage REIT generated $0.79 per share of EAD, comfortably above the $0.75 per share dividend it paid. That marked the ninth straight quarter that Annaly's EAD exceeded its dividend payment:
Data source: Annaly Capital Management. Chart by the author.
Annaly's rising EAD over the past nine quarters has enabled it to increase its dividend twice during this period, including a recent boost from $0.70 to $0.75 per share. That has reversed the prior downtrend in Annaly's EAD and dividend.
Will Annaly's EAD remain above its dividend? Annaly's recent decision to raise its dividend reflects "the durable earnings power of our portfolio," stated CEO David Finkelstein in the second-quarter earnings press release. Several factors contribute to this durability, including Annaly's scale (it's the largest residential mortgage REIT by market cap), diversification (it invests in Agency MBS, residential credit, and mortgage servicing rights (MSR)), and financial strength (economic leverage of 5.6 times, down from 5.7x in the prior quarter and ample liquidity).
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Those factors drive the REIT's expectation that it can continue to generate attractive risk-adjusted returns across market cycles. It currently sees meaningful investment opportunities across its three strategies. Annaly can earn levered returns of 11% to 13% on new MSR investments, 12% to 15% on residential credit, and 14% to 16% on Agency MBS investments. It has the flexibility to allocate new capital to the best investment opportunities it identifies. That was in Agency MBS during the second quarter, as it grew that portfolio by $3 billion while maintaining the size of its residential credit and MSR portfolios. As long as Annaly can earn high returns on new investments, it should be able to continue its trend of generating EAD in excess of its dividend.
Excess EAD means the dividend is safe Annaly ran into trouble several years ago when its EAD began to decline, forcing it to cut its dividend a few times. However, that trend has reversed, enabling the REIT to boost its payout as its EAD has risen. As long as that metric remains above the dividend, the payout is safe. That appears to be the case for now, given the company's increasingly durable earnings and the strong returns it can earn on new investments. However, it's a metric investors need to watch closely, as changes in EAD will directly affect the dividend.
Annaly Capital Management is rated a Strong Buy for its 13.38% dividend yield and significant capital appreciation potential by 2030. NLY's diversified REIT model, resilient through multiple economic cycles, benefits from agency MBS, MSR, and residential credit strategies with yields up to 16%. I expect falling interest rates to expand NLY's net interest margin, driving both dividend growth and share price appreciation toward a $40 target by 2030.
Annaly Capital Management, Inc. (NLY) Q2 2026 Earnings Call July 22, 2026 9:00 AM EDT
Company Participants
Sean Kensil
David Finkelstein - CEO, Co-Chief investment Officer & Director
Serena Wolfe - Chief Financial Officer
Michael Fania - Co-Chief Investment Officer & Head of Residential Credit
Ken Adler - Head of Mortgage Servicing Rights & Portfolio Analytics
Conference Call Participants
Bose George - Keefe, Bruyette, & Woods, Inc., Research Division
Crispin Love - Piper Sandler & Co., Research Division
Ameeta Lobo Nelson - UBS Investment Bank, Research Division
Douglas Harter - BTIG, LLC, Research Division
Harsh Hemnani - Green Street Advisors, LLC, Research Division
Jason Stewart - Compass Point Research & Trading, LLC, Research Division
Hong Zhang - JPMorgan Chase & Co, Research Division
Trevor Cranston - Citizens JMP Securities, LLC, Research Division
Kenneth Lee - RBC Capital Markets, Research Division
Presentation
Operator
Thank you for standing by, and welcome, everyone, to the Annaly Capital Management, Second Quarter 2026 Earnings Conference Call.
[Operator Instructions]
At this time, I would like to turn the conference over to Sean Kensil, Director of Investor Relations. Please go ahead.
Sean Kensil
Good morning, and welcome to the Second Quarter 2026 Earnings Call for Annaly Capital Management. Please note that this call is being recorded. As a reminder, materials for today's call are available on our website at www.annaly.com. Today's call may include forward-looking statements, which are subject to certain risks and uncertainties that could cause actual results to differ materially and refer to certain non-GAAP measures. Please see the notices in our earnings release for important information regarding forward-looking statements and non-GAAP measures.
Participants on this morning's call include David Finkelstein, Chief Executive Officer and Co-Chief Investment Officer; Serena Wolfe, Chief Financial Officer; Mike Fania, Co-Chief Investment Officer and Head of Residential Credit; V.S. Srinivasan, Head of Agency; and Ken Adler, Head of Mortgage Servicing Rights.
Key Takeaways Annaly beat Q2 earnings estimates as earnings available for distribution rose year over year.NLY's total portfolio reached $109.4 billion, including a $95 billion Agency portfolio at quarter-end.NLY raised its quarterly dividend, increased hedging and expanded financing capacity amid rate uncertainty. Annaly Capital Management, Inc. (NLY - Free Report) reported second-quarter 2026 earnings available for distribution (EAD) per average share of 79 cents, which beat the Zacks Consensus Estimate of 75 cents. The figure increased from 73 cents in the year-ago quarter.
NLY’s net interest income (NII) and net interest margin improved year over year in the reported quarter. Notably, the year-over-year increase in book value per common share (BVPS) was also encouraging. However, higher economic funding costs were concerning.
Net income available to common stockholders was $781.6 million compared with $19.8 million in the year-ago period.
Inside Annaly’s Q2 HeadlinesNII was $488.2 million in the reported quarter, which lagged the Zacks Consensus Estimate by 4.1%. In the prior-year quarter, the company reported NII of $273.2 million.
Net interest spread (excluding PAA) of 1.50% in the second quarter increased from 1.47% in the prior-year quarter.
Annaly’s BVPS was $20.15 as of June 30, 2026, up from $18.45 in the prior-year quarter. At the end of the reported quarter, the company’s economic capital ratio was 14.9%, up from 14.3% in the prior-year quarter.
In the second quarter, the weighted average actual constant prepayment rate was 11.6%, up from 8.7% in the year-ago quarter.
Annaly generated an annualized EAD return on average equity of 15.12% in the second quarter, which increased from the prior-year quarter’s 14.86%.
The company’s total portfolio was $109.4 billion in the quarter, including a $95 billion Agency portfolio. The Residential Credit portfolio was $10.4 billion, while the MSR portfolio was $4.1 billion.
NLY Keeps Leverage Conservative With Ample LiquidityAnnaly maintained a disciplined leverage profile in the quarter, with GAAP leverage at 7.4X, up from 7.3X in the prior quarter, and economic leverage at 5.6X, down from 5.7X. The company also reported total stockholders’ equity of $16.9 billion as of the quarter-end.
Liquidity remained a focal point, given ongoing macro and rate uncertainty. Annaly ended the quarter with $9.6 billion in total assets available for financing, including $5.5 billion in cash and unencumbered Agency MBS. The company also increased financing capacity in its Residential Credit business by $740 million through expanded credit facilities.
Annaly Hedging Rises Amid Macro UncertaintyAgainst an uncertain rate environment, NLY adopted a more defensive hedge posture. The company ended the quarter with a hedge ratio of 97%, up from 87% in the prior quarter, while its hedge portfolio increased to $92 billion from $81 billion.
Funding costs were mixed during the quarter. Average GAAP costs of interest-bearing liabilities declined one basis point sequentially to 4.28%, while average economic costs increased three basis points to 3.96%. The net interest margin, excluding PAA, was 1.76% compared with 1.71% in the second quarter of 2025. Average yield on interest-earning assets, excluding the premium amortization adjustment, was 5.46%, up from 5.41% in the year-ago quarter.
NLY Leans on Dividend Coverage & Capital RaisingA key highlight for income-focused investors was that earnings again exceeded the common dividend. Annaly increased its quarterly common stock cash dividend to 75 cents per share for the second quarter from 70 cents in the year-ago period, supported by its earnings available for distribution.
The company also leaned on equity issuance to support growth. Annaly raised $447 million through its at-the-market sales program during the quarter, which it characterized as accretive, and largely deployed the capital into higher-coupon TBA securities and specified pools.
Our Take on NLYAnnaly’s second-quarter results benefited from higher net interest income, stronger net income and an improved net interest margin. While book value per share and the economic capital ratio rose year over year, higher economic funding costs and faster prepayment activity are likely to keep returns sensitive in the near term.
NLY currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance & Earnings Dates of Annaly’s PeersAGNC Investment Corp. (AGNC - Free Report) reported second-quarter 2026 net spread and dollar roll income per common share of 40 cents, topping the Zacks Consensus Estimate by 5.3%. The metric increased 5.3% from the year-ago quarter’s 38 cents.
AGNC’s results benefited from higher NII, an increase in tangible net book value per share (BVPS) and growth in the investment portfolio. However, a lower net interest spread, a rise in the weighted average cost of funds and elevated prepayment rates were concerning.
Starwood Property Trust, Inc. (STWD - Free Report) is expected to post second-quarter 2026 results on Aug. 06.
Over the past seven days, the Zacks Consensus Estimate for STWD’s quarterly earnings has been unchanged at 41 cents per share.
Dividend Increases: From Over 10% Yields to Over 10% Dividend GrowthAnnaly Capital Management NYSE: NLY reported a stronger second quarter of 2026, citing book value growth, improved earnings available for distribution and continued expansion across parts of its diversified housing finance platform.
Chief Executive Officer and Co-Chief Investment Officer David Finkelstein said the company generated a 5.5% economic return during the quarter, helped by lower rate volatility despite rising interest rates. He said earnings available for distribution, or EAD, totaled $0.79 per share, marking the ninth consecutive quarter in which EAD exceeded the company’s dividend.
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Here's Who Wins If Trump's 50-Year Mortgages Come to MarketAnnaly recently increased its quarterly common dividend to $0.75 per share. Finkelstein said the company’s board was “very methodical” in evaluating the dividend and wanted to ensure it was “earnable.” He said Annaly expects to cover the payout over time, while acknowledging that individual quarters could fluctuate.
Book Value Rises as Earnings Top Dividend Chief Financial Officer Serena Wolfe said Annaly’s book value per share increased 1.7% from the prior quarter to $20.15 as of June 30, 2026. Including the $0.75 quarterly dividend, the company’s economic return for the first half of the year was 6.9%.
6 Mortgage REITS: How Badly Could Rising Rates Hurt Them?Wolfe said EAD per share rose $0.03 from the prior quarter to $0.79. The increase was primarily driven by higher average yields on the Agency portfolio, higher securitization volumes in Residential Credit and favorable funding costs. Average repo rates declined 6 basis points to 3.84% during the quarter, while the weighted average coupon on the Agency portfolio increased 11 basis points to 5.11%.
Net interest margin increased 5 basis points to 1.76%, and net interest spread improved 8 basis points to 1.50%. Wolfe said both metrics benefited from higher asset yields, partly offset by modest increases in economic funding costs and lower swap income as SOFR declined during the period.
Annaly ended the quarter with economic leverage of 5.6 times, down slightly from 5.7 times in the prior quarter. The company also raised about $450 million of equity through its at-the-market program during the quarter.
Agency Portfolio Grows Amid Strong Demand Finkelstein said Annaly increased its Agency portfolio by roughly $3 billion during the quarter, ending at $95 billion in market value. The capital allocation to Agency assets rose to 57%.
He said Agency mortgage-backed securities spreads tightened during the quarter as de-escalation in the Middle East contributed to lower realized and implied rate volatility. Demand remained strong, supported by fixed-income inflows, overseas investors and a robust collateralized mortgage obligation market, which Finkelstein said is absorbing about 30% of gross issuance.
Annaly modestly moved up in coupon during the quarter, reducing exposure to 4.5% coupons in favor of 5.5% and 6% coupons. Finkelstein said new capital was primarily invested into production coupon mortgage-backed securities and Agency commercial mortgage-backed securities.
V.S. Srinivasan, Head of Agency, said in the Q&A session that the company’s strategy for managing prepayment risk has been to move up in coupon through “quality specified pools” with call protection. He said Annaly has been deliberate in constructing that portfolio over the last several years.
Finkelstein also said Annaly added swap hedges during the quarter to protect against rising rates. He said the hedge portfolio remains diversified across Treasuries, futures and swaps, with a preference for swaps given their carry profile and balance sheet availability.
Residential Credit Platform Posts Record Loan Purchases Annaly’s Residential Credit portfolio ended the second quarter at $10.4 billion in market value, roughly unchanged from the prior quarter and representing 22% of firm capital.
Finkelstein said Annaly purchased $7.1 billion of loans during the quarter, including activity through the Onslow Bay correspondent channel, whole loan bulk purchases and partnerships. He called it a new quarterly record for the business. Onslow Bay produced $6.7 billion of locks and $5.1 billion of fundings.
The company closed 13 securitization deals during the quarter totaling $6.8 billion in principal balance, creating about $780 million of proprietary investments. Year to date, the OBX platform priced 25 transactions totaling $14.2 billion. Finkelstein said Annaly remains the largest issuer of Expanded Credit mortgages and the second-largest issuer overall.
Mike Fania, Co-Chief Investment Officer and Head of Residential Credit, said Annaly’s advantages in sourcing loans include longstanding originator relationships, a broad correspondent network and consistent pricing through market cycles. He said the company faces more than 350 correspondents and recently expanded into non-delegated correspondent lending.
Fania said Non-QM and DSCR loans remain Annaly’s core Residential Credit collateral types. He said those categories accounted for 70% of the company’s 2026 securitization volume to date and remain the highest-returning and most scalable areas for Annaly.
MSR Portfolio Remains Stable Annaly’s mortgage servicing rights portfolio ended the quarter at about $4.1 billion in market value, representing 21% of firm capital. Finkelstein said the company modestly rotated the portfolio toward higher average loan balances, committing to purchase approximately $200 million in market value of MSR while also committing to sell two lower-loan-balance bulk pools for $220 million in proceeds.
Ken Adler, Head of Mortgage Servicing Rights, said Annaly’s variable-cost model using sub-servicers gives it flexibility in the MSR market. He said moving into higher average loan balance MSR enhances returns because the company pays a fixed servicing cost per loan, making higher-balance loans more efficient for Annaly’s model.
Finkelstein said MSR portfolio fundamentals remained favorable. Prepayment speeds rose seasonally to 5.2 CPR but remained below initial model projections. Serious delinquencies were range-bound around 50 basis points. The portfolio had a weighted average note rate of 3.3%, which Finkelstein said was the lowest among the 20 largest MSR holders.
Management Highlights Liquidity and Capital Flexibility Wolfe said Annaly ended the quarter with $8 billion in unencumbered assets, including $5.5 billion in cash and unencumbered Agency mortgage-backed securities. Including pledged but undrawn MSR value, she said Annaly had $9.6 billion of total assets available for financing at quarter-end, up about $580 million from the prior quarter.
Finkelstein said Annaly continues to see compelling opportunities across Agency, Residential Credit and MSR. He characterized Agency spreads as attractive, with mid-teens levered returns, and said Residential Credit continues to offer strong growth potential supported by Annaly’s sourcing and securitization capabilities.
In response to an analyst question about capital deployment, Finkelstein said the marginal dollar would likely go into Agency, with Residential Credit added as opportunities arise. He also said MSR remains attractive and noted that Annaly had purchased an MSR package after quarter-end with a sub-3% note rate.
Finkelstein said Annaly’s operating-light structure remains a key advantage, allowing the company to allocate capital across housing finance opportunities without depending on loan origination volume or servicing operations.
About Annaly Capital Management (NYSE:NLY)Annaly Capital Management, Inc is a publicly traded real estate investment trust (REIT) that specializes in generating income through investment in mortgage-related assets. The company's core business activities include the acquisition, financing, and management of a diversified portfolio of agency and non-agency residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and other real estate debt instruments. Annaly seeks to profit from the spread between the interest earned on its mortgage investments and its cost of funds, as well as from capital gains realized through active portfolio management.
Founded in 1997 and headquartered in New York City, Annaly has grown to become one of the largest mortgage REITs in the United States.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].
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Annaly Capital Management (NLY - Free Report) came out with quarterly earnings of $0.79 per share, beating the Zacks Consensus Estimate of $0.75 per share. This compares to earnings of $0.73 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of +5.33%. A quarter ago, it was expected that this real estate investment trust would post earnings of $0.74 per share when it actually produced earnings of $0.76, delivering a surprise of +2.7%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
Annaly, which belongs to the Zacks REIT and Equity Trust industry, posted revenues of $488.19 million for the quarter ended June 2026, missing the Zacks Consensus Estimate by 4.09%. This compares to year-ago revenues of $273.2 million. The company has not been able to beat consensus revenue estimates over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
Annaly shares have added about 1.5% since the beginning of the year versus the S&P 500's gain of 8.7%.
What's Next for Annaly?While Annaly has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Ahead of this earnings release, the estimate revisions trend for Annaly was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.76 on $512 million in revenues for the coming quarter and $3.02 on $1.99 billion in revenues for the current fiscal year.
Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, REIT and Equity Trust is currently in the bottom 20% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Another stock from the same industry, ACRES Commercial (ACR - Free Report) , has yet to report results for the quarter ended June 2026. The results are expected to be released on July 29.
This commercial real estate investment trust is expected to post quarterly earnings of $0.11 per share in its upcoming report, which represents a year-over-year change of +175%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.
ACRES Commercial's revenues are expected to be $12.3 million, up 43.5% from the year-ago quarter.
Annaly Capital Management (NLY 0.48%) and Starwood Property Trust (STWD +0.12%) are two of the largest real estate investment trusts (REITs) focused on mortgage investments. Annaly is the biggest residential mortgage REIT by market cap, while Starwood is the largest one focused on commercial real estate financing. Both REITs currently offer eye-popping yields: Annaly's is 12.5%, while Starwood's is 11.6%.
Here's a look at which of these high-yielding financial stocks is the safer buy for income-focused investors right now.
Image source: Getty Images.
Finally trending in the right direction Annaly Capital Management currently pays a $0.75 per-share quarterly dividend. The mortgage REIT just increased its payment from $0.70 per share. That payment boost underscores "the strong performance of Annaly's diversified housing finance portfolio and our focus on driving shareholder value," stated CEO David Finkelstein in the press release unveiling the increased payment. It's Annaly's second dividend increase in the last 18 months (it hiked its payout from $0.65 per share to $0.70 per share in early 2025). That reversed a long series of payment cuts over the years.
The REIT's improved earnings are driving the dividend increases. Its earnings available for distribution (EAD) have risen from a low of $0.64 per share in the first quarter of 2024 to its recent level of $0.76 per share. Its current earnings support its recently raised dividend.
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Annaly has built a diversified platform that delivers durable cash flows and superior risk-adjusted returns. It invests in Agency MBS (pools of mortgages guaranteed by government agencies), residential credit (non-agency residential mortgages), and mortgage servicing rights (MSR). That diversification gives it the flexibility to capitalize on current market conditions. For example, it allowed its Agency MBS portfolio to decline in the first quarter while investing heavily to grow its residential credit portfolio (up 30%) and MSR portfolio. That positions it for continued EAD growth, putting its payout on a sustainable footing.
A model of income consistency Starwood Property currently pays a quarterly dividend of $0.48 per share. It has never cut its payment in its 17 years as a public company and has maintained its current rate for more than a decade. It's the only mortgage REIT that has never cut its dividend.
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That's the good news. The concern lies in its current coverage ratio. Starwood's distributable earnings were only $0.39 per share last quarter. While that was up from $0.37 per share in the prior quarter, it's still below the dividend. That's due in part to the short-term dilution from its purchase of Fundamental Income Properties for $2.2 billion last year. It took a near-term earnings hit because it wanted to own that platform. Fundamental will provide durable, growing rental income (at the time of the deal, Fundamental's portfolio of net-lease real estate had a 17-year weighted-average lease term and 2.2% average annual rent escalations). That growing rental income will be very accretive to earnings starting next year.
Fundamental Income is part of Starwood's plan to grow its earnings and dividend coverage. It has a clear line of sight to achieve earnings above the current dividend level in the coming quarters. Catalysts include growth from Fundamental Income, reinvesting higher-than-normal cash balances across its businesses, and working through the sales of real estate assets that currently aren't generating income. This visibility into improved earnings drives the REIT's confidence in the dividend.
The current numbers point to Annaly Annaly's growing earnings have enabled the REIT to increase its dividend following a series of prior cuts. It's currently earning more than its dividend level, which should continue for the foreseeable future. Starwood, on the other hand, isn't currently earning enough to cover its dividend. While the REIT has a clear line of sight to earnings above its dividend in the coming quarters, there's always a risk its plan will fail to deliver. Given that, Annaly is currently the safer income play.
Key Takeaways Annaly's Q2 earnings are estimated to be 75 cents per share, indicating a rise of 2.7% y/y.NII is projected to be $509 million, suggesting 86.3% growth from the prior-year quarter.Higher servicing income may support results, while MBS volatility could weigh on book value. Annaly Capital Management Inc. (NLY - Free Report) is scheduled to report second-quarter 2026 results on July 21, after market close. The company’s net interest income (NII) and earnings are expected to reflect year-over-year increases in the quarter to be reported.
In the last reported quarter, the mortgage real estate investment trust's earnings available for distribution per share surpassed the Zacks Consensus Estimate. The company's net interest income and net interest margin improved year over year. The year-over-year increase in book value per share was also encouraging.
Annaly has an impressive earnings surprise history. The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 2.07%.
Let us see how things have shaped up before the second-quarter earnings announcement.
The consensus estimate for second-quarter NII is pegged at $509 million, suggesting an 86.3% increase from the year-ago quarter's reported NII.
The Zacks Consensus Estimate for earnings has been revised upward to 75 cents over the past seven days. The estimate indicates a 2.7% increase from the year-ago quarter's actual.
Factors to Shape NLY’s Q2 PerformanceThe Federal Reserve kept interest rates unchanged in the second quarter of 2026, while noting that economic activity continued to expand at a solid pace despite elevated uncertainty and inflation remaining above its 2% target. Throughout the quarter, mortgage rates remained elevated, averaging in the mid-6% range. While refinance activity witnessed a modest pickup as rates briefly declined during parts of the quarter, purchase volume remained under pressure due to constrained housing inventory and elevated home prices.
Given this backdrop, NLY's mortgage-backed securities (MBS) portfolio is likely to have faced continued interest-rate volatility and fluctuating agency MBS spreads during the quarter. Sharp movements in U.S. Treasury yields amid changing expectations around inflation and Federal Reserve policy likely contributed to volatility in MBS valuations. This might have pressured the company's book value performance in the second quarter of 2026.
Although mortgage rates temporarily eased during parts of the quarter, they generally remained well above the levels of most outstanding mortgages, keeping refinancing incentives relatively subdued. As a result, NLY's constant prepayment rates are expected to have remained relatively contained, helping moderate premium amortization expenses and support NII. Stable prepayments, along with attractive reinvestment opportunities at higher yields, are also likely to have supported average asset yields during the second quarter.
Given manageable prepayment speeds during the second quarter, the company's mortgage servicing rights portfolio is likely to have benefited to some extent. This is anticipated to have increased NLY's servicing fees in the quarter to be reported.
The Zacks Consensus Estimate for net servicing income of $167.7 million indicates a year-over-year rise of 31.9%.
What the Zacks Model Reveals for AnnalyOur proven model predicts an earnings beat for NLY this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is exactly the case here.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: Annaly has an Earnings ESP of +0.33%.
Zacks Rank: NLY currently carries a Zacks Rank of 2.
REIT Stocks to ConsiderHere are a couple of REIT stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:
NETSTREIT Corp. (NTST - Free Report) is expected to release second-quarter 2026 earnings on July 22. The company has an Earnings ESP of +1.94 and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Quarterly earnings estimates for NETSTREIT have been unchanged at 34 cents per share over the past week.
Agree Realty Corporation (ADC - Free Report) is expected to release second-quarter 2026 earnings on July 30. The company has an Earnings ESP of +0.27% and a Zacks Rank #3 at present.
Quarterly earnings estimates for Agree Realty have been unchanged at $1.13 per share over the past week.
Annaly Capital (NLY +0.63%) is a mortgage real estate investment trust (REIT). This is a unique niche of the broader REIT sector that is a bit more complex to understand. That said, mREITs often have very large yields, luring in dividend investors that may not understand the risks they are taking on. Annaly Capital's 13% yield has a very real near-term headwind. Here's what you need to know.
How does Annaly Capital make money? A property owning REIT buys a building and leases it to tenants, generating rental income. Mortgage REITs like Annaly Capital buy mortgages that have been pooled into bond-like securities, generating interest income. In both cases, leverage is employed to enhance returns, with profits driven by the difference between operating costs (including interest expenses) and income. However, property REITs generally finance their operations with mortgages or bond issuance. Both generally have rates that don't change with interest rates. Mortgage REITs, on the other hand, tend to make use of short-term loans with rates that adjust quickly.
Image source: Getty Images.
The problem is in the timing. If rates rise, mREITs quickly face higher interest costs. But the securities they own have long maturities and don't produce more income, so profits come under pressure. Worse, the securities mREITs own will likely also fall in value, so the yield they offer to a new buyer would be equivalent to the prevailing market yield. That's a double hit for an mREIT: lower earnings and a drop in its net book value per share.
Annaly needs rates to hold steady In the first quarter of 2026, Annaly generated $0.76 per share in earnings available for distribution. It paid out $0.70 per share in dividends during the quarter. That's a 92% payout ratio, which is high but not unusual in the mREIT sector. But if rates rise, Annaly's ability to pay its dividend could come under pressure quickly.
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The problem is that oil prices are rising again as the conflict in the Middle East flares up. High oil prices have been stoking inflation, which is running hotter than the Federal Reserve would like. And that could force the Federal Reserve to increase interest rates, perhaps even at its next meeting.
The history is clear, Annaly's dividend is highly variable If you examine Annaly's longer-term dividend history, you'll find it is marked by volatility. You simply can't buy this stock expecting the dividend to remain stable, which makes it a hard sell for investors trying to live off their dividends. And the company just increased its quarterly dividend to $0.75 per share, which could make dividend coverage even tighter based on the first quarter's distributable earnings results. Dividend investors should tread with extreme caution here.
In the latest close session, Annaly Capital Management (NLY - Free Report) was up +2.13% at $23.01. This move outpaced the S&P 500's daily gain of 0.38%. On the other hand, the Dow registered a gain of 0.02%, and the technology-centric Nasdaq increased by 0.9%.
Coming into today, shares of the real estate investment trust had gained 1.3% in the past month. In that same time, the Finance sector gained 2.89%, while the S&P 500 gained 1.27%.
Investors will be eagerly watching for the performance of Annaly Capital Management in its upcoming earnings disclosure. The company's earnings report is set to be unveiled on July 21, 2026. In that report, analysts expect Annaly Capital Management to post earnings of $0.74 per share. This would mark year-over-year growth of 1.37%. Simultaneously, our latest consensus estimate expects the revenue to be $509 million, showing a 86.31% escalation compared to the year-ago quarter.
NLY's full-year Zacks Consensus Estimates are calling for earnings of $3 per share and revenue of $1.99 billion. These results would represent year-over-year changes of +2.74% and +75.25%, respectively.
Investors should also take note of any recent adjustments to analyst estimates for Annaly Capital Management. These recent revisions tend to reflect the evolving nature of short-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the business outlook.
Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.
The Zacks Rank system, ranging from #1 (Strong Buy) to #5 (Strong Sell), possesses a remarkable history of outdoing, externally audited, with #1 stocks returning an average annual gain of +25% since 1988. Over the last 30 days, the Zacks Consensus EPS estimate has witnessed a 0.59% increase. As of now, Annaly Capital Management holds a Zacks Rank of #2 (Buy).
From a valuation perspective, Annaly Capital Management is currently exchanging hands at a Forward P/E ratio of 7.52. This indicates a discount in contrast to its industry's Forward P/E of 8.75.
It is also worth noting that NLY currently has a PEG ratio of 6.84. Comparable to the widely accepted P/E ratio, the PEG ratio also accounts for the company's projected earnings growth. The average PEG ratio for the REIT and Equity Trust industry stood at 1.35 at the close of the market yesterday.
The REIT and Equity Trust industry is part of the Finance sector. Currently, this industry holds a Zacks Industry Rank of 204, positioning it in the bottom 18% of all 250+ industries.
The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.
The market expects Annaly Capital Management (NLY - Free Report) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended June 2026. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.
The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on July 21. On the other hand, if they miss, the stock may move lower.
While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise.
Zacks Consensus EstimateThis real estate investment trust is expected to post quarterly earnings of $0.74 per share in its upcoming report, which represents a year-over-year change of +1.4%.
Revenues are expected to be $509 million, up 86.3% from the year-ago quarter.
Estimate Revisions TrendThe consensus EPS estimate for the quarter has been revised 0.9% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.
Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change.
Price, Consensus and EPS Surprise
Earnings WhisperEstimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. Our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction) -- has this insight at its core.
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.
Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only.
A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP.
Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell).
How Have the Numbers Shaped Up for Annaly?For Annaly, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company's earnings prospects. This has resulted in an Earnings ESP of +1.01%.
On the other hand, the stock currently carries a Zacks Rank of #2.
So, this combination indicates that Annaly will most likely beat the consensus EPS estimate.
Does Earnings Surprise History Hold Any Clue?Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number.
For the last reported quarter, it was expected that Annaly would post earnings of $0.74 per share when it actually produced earnings of $0.76, delivering a surprise of +2.70%.
Over the last four quarters, the company has beaten consensus EPS estimates four times.
Bottom LineAn earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss.
That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
Annaly appears a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
Many parents assume braces are something they will deal with when their children reach high school. Increasingly, that is no longer true. Orthodontists now evaluate some children as early as age seven, looking for jaw-development issues, crowding, bite problems, and other concerns that can become more expensive to fix later. What once seemed like a teenage expense can begin years earlier and, for families with multiple children, repeat several times.
The costs add up quickly. A family with three children can easily spend $15,000 to $30,000 on orthodontic treatment over the course of a decade. Most parents pay those bills from savings or monthly cash flow. This article explores another approach: building a portfolio whose income covers the orthodontist’s bill while preserving the principal for the next family goal.
Braces are not always cosmetic Many parents think of braces as a cosmetic expense, but orthodontists often recommend treatment for functional reasons. Severe crowding can make teeth difficult to clean, increasing the risk of cavities and gum disease. Significant bite problems can contribute to uneven tooth wear, jaw pain, chewing difficulties, speech issues, and even sleep-related breathing problems in some children. Straight teeth may look better, but orthodontic treatment is often about preserving long-term oral health rather than appearance alone.
Parents rarely view braces as an investment, but in some respects they are. Straight teeth can improve confidence, speech, and first impressions during school, college, and job interviews. Fair or not, appearance influences social and professional opportunities throughout life. Orthodontic treatment cannot guarantee success, but many parents see it as one of the ways they can help remove obstacles for their children as they enter adulthood.
Orthodontics may start earlier, and last longer, than you expect Many parents are surprised to learn that orthodontic treatment often begins before the teenage years, as young as 7 years old. Modern orthodontists frequently evaluate children around age seven because jaw growth can still be influenced while the mouth is developing. Early treatment may create room for incoming permanent teeth, correct bite problems, and reduce the need for extractions or more invasive procedures later. In some cases, a child who receives early intervention still requires braces as a teenager, but the second phase may be shorter, simpler, and less expensive than it otherwise would have been.
Orthodontic treatment does not always end when the brackets come off. Some children require multiple phases of treatment. Others need retainers for years afterward. Teeth naturally shift over time, and patients who stop wearing retainers can lose some of the correction they paid for. The orthodontist’s bill may be temporary, but maintaining the results often requires continued attention.
What braces actually cost in 2026 Traditional metal braces typically run $5,000 to $6,000 per child. Ceramic and clear aligners push closer to $7,500, and complex cases can hit $10,000. Insurance often caps lifetime orthodontic coverage around $1,500 to $2,500 per child, and many plans exclude adults entirely. Regional differences matter: urban Northeast and California pricing runs well above the national average. Orthodontic costs have steadily risen over time, and treatment often arrives during the same years parents are paying for sports, activities, vehicles, college savings, and countless other child-related expenses.
The three-kid problem Treatment rarely lines up neatly. Child one finishes a 24-month plan just as child two starts. Child three follows two years later. Spread over roughly six years, three children at $7,500 each averages $3,750 per year in out-of-pocket cost. The $5,000 scenario lands near $2,500 per year. The $10,000 scenario lands near $5,000 per year. Layered on top of activities, summer camp, and rising healthcare costs (May 2026 CPI hit 335.123), they crowd the household budget.
The capital required at each yield tier Using the middle scenario of $3,750 in annual income:
3.5% yield: $3,750 divided by 0.035 equals $107,143. Dividend-growth utilities and core REITs live here. 5% yield: $3,750 divided by 0.05 equals $75,000. Net-lease REITs and high-dividend equity. 7% yield: $3,750 divided by 0.07 equals $53,571. BDCs and preferred shares. 10% yield: $3,750 divided by 0.10 equals $37,500. Mortgage REITs and leveraged income funds. In the highest-cost scenario, three children requiring $10,000 of orthodontic treatment each would create roughly $30,000 of total expenses. Spread across six years, that works out to about $5,000 annually, requiring roughly $100,000 of capital at a 5% yield.
Building blocks worth a look Conservative tier: NextEra Energy (NYSE:NEE | NEE Price Prediction) carries a 2.71% yield with a stated 8%+ EPS CAGR through 2032 and 10% near-term dividend growth. Southern Company (NYSE:SO) yields about 3.2% with a 25-year streak of quarterly increases.
Moderate tier: Realty Income (NYSE:O) pays monthly, currently around 5.3%, with 670 consecutive monthly dividends and Q1 2026 AFFO of $1.13. STAG Industrial (NYSE:STAG) yields about 4% on industrial net-lease properties at 97.2% occupancy.
Aggressive tier: Main Street Capital (NYSE:MAIN) yields roughly 6% on the regular monthly, with 19 consecutive supplemental quarterly dividends currently at $0.30. Annaly Capital Management (NYSE:NLY) yields near 12.6%, but book value drifted from $20.21 to $19.82.
Payment plan versus portfolio An orthodontist payment plan spreads the bill over time. A portfolio attempts to generate the cash flow needed to make those payments without drawing down assets. The difference is that when the braces come off, the payment plan ends and the money is gone. The portfolio remains available for the next family milestone.
The timing and growth advantages Braces are not a surprise. Parents typically see them coming five to ten years out, which is the window where conservative dividend growth wins. NextEra raised its quarterly dividend from $0.385 in 2021 to $0.5665 in 2025. Realty Income marched from $0.2325 monthly in 2020 to $0.271 in mid-2026. A 3.5% yield growing 8% annually doubles in nine years; a 10% mortgage REIT yield with flat or declining book value does not.
When a dedicated portfolio does not make sense Families with strong cash flow may find it simpler to absorb $300 monthly than to earmark six figures. Decent dental insurance can knock $1,500 to $2,500 off per child. A $40,000 sleeve dedicated to high-yield names introduces single-stock risk that outweighs the convenience.
Three actions worth taking Confirm your actual orthodontic estimate with two providers before sizing any sleeve. Compare the trailing 10-year total return of a 3.5% dividend-growth utility against a 10% mortgage REIT to see what compounding does. If treatment is more than five years out, weight the tiers toward growth, not maximum current yield. Contact [email protected] for any questions or corrections.
When it comes to mortgage REITs, Annaly Capital Management's (NLY) common stock usually gets the most attention. That makes sense. It's the largest mortgage REIT in the market. However, the common shares aren't always the best way to invest in a mortgage REIT. In fact, they are one of the worst for very conservative investors.
Mortgage REIT common stocks can produce excellent returns when purchased at attractive valuations. Those valuations should be based primarily on book value.
For investors who aren’t into trading and want a safer dividend or are just looking for income, preferred shares often provide a much better balance between risk and reward.
Today, NLY-F (NLY.PR.F) remains one of the more attractively priced preferred shares from NLY.
The REIT Forum
NLY-F is a fixed-to-floating preferred share. Some preferred shares pay the same coupon indefinitely. NLY-F floats based on short-term interest rates plus a fixed spread.
The REIT Forum
NLY-F’s spread of 4.993% is the highest of any Annaly preferred share. That feature has been great for investors over the last several years. As short-term rates moved higher, the dividend rate on NLY-F increased. While investors should expect some changes in future payments as interest rates change, the current dividend remains attractive relative to many other options in the market. The floating-rate structure also helps mitigate inflation risk and rising rates, which can erode the value of preferred shares that only pay a fixed rate.
Why Preferred Shares? One major advantage of preferred shares is that they sit above the common stock dividend in the capital structure. Before any dividend can be paid to common shareholders, preferred dividends must be paid in full.
While this doesn’t eliminate risk, it does provide a layer of protection that common shareholders simply do not have.
Strong Coverage When evaluating preferred shares, one of the metrics we keep an eye on is the common-equity-to-preferred-equity ratio. The concept is straightforward. The larger the common equity relative to the preferred shares, the more protection preferred shareholders have if conditions deteriorate, generally speaking.
Annaly preferred shares continue to maintain one of the strongest coverage ratios in the mortgage REIT sector. The company has a substantial amount of common equity supporting its preferred shares. When using this ratio, we use the call value of the preferred share, which is $25. We would not use the current market value of the preferred share.
Coverage ratios are never a guarantee against risk, but they remain one of the more useful metrics for comparing preferred share risk across the sector.
The Main Risk The biggest risk for NLY-F is not credit risk. It is called risk.
Because NLY-F carries a relatively high dividend rate, management could eventually decide that they want to call shares and replace them with a lower cost of capital. Investors should watch the annualized yield-to-call metric, as it indicates how much they stand to lose if the company calls the shares. When a preferred share trades above its call value, the possibility of redemption becomes a bigger risk for the investor.
The primary reason we view NLY-F as a hold instead of a buy is that NLY could decide to call the shares with only 30 days' notice. Investors may decide that they are willing to take on that risk and purchase shares anyway. Investors who are already holding shares may continue to hold them. We just want investors to be aware of the biggest risk when it comes to NLY-F.
Other NLY Preferred Shares Annaly has several other preferred shares outstanding. In our view, NLY-F and NLY-I (NLY.PR.I) are currently the most attractive. Both the F and I series are so similar that this article could easily work for both with a few minor adjustments. However, this article is about NLY-F. We compare all of Annaly's preferred shares before deciding if we want to make a purchase rather than focusing on a single preferred share in isolation.
Final Thoughts We continue to view Annaly as one of the strongest names in the mortgage REIT sector. That doesn’t mean we believe it is currently a good investment at recent prices. For investors looking for dependable income and lower volatility than the common shares, preferred shares remain a very compelling potential buy. If NLY-F were to drop slightly in price, we would consider buying shares.
NLY-F offers a combination of a high dividend, strong coverage, and is backed by the biggest mortgage REIT in the sector. Call risk deserves attention, but NLY-F remains one of the best opportunities in the sector for income-focused investors when pricing is favorable.
As always, valuation drives our decisions. We don’t buy securities simply because we like the company. We believe it is important to wait for prices that adequately compensate us for the risks we are taking on. We will act when the market gives us the opportunity.
All the major Wall Street firms we cover here at 24/7 Wall St. have a list of the top stock picks for their institutional and retail clients to invest in. Typically, these are companies that analysts have a high level of conviction in and feel strongly about their fundamentals and forward-looking prospects. In addition, they often have strong upside to the assigned price target and are assigned a Buy or Overweight rating, depending on the company providing the coverage. After a furious rally off the February lows and with all major indices trading at or near all-time highs, many investors are treading carefully as we start the third quarter of 2026. With earnings season right around the corner, we were very interested to see which stocks were on the July edition of J.P. Morgan’s Analyst Focus List. All will provide investors with steady passive income and have the potential to deliver solid total returns.
The research team at J.P. Morgan updates its U.S. Analyst Focus List monthly, as the company describes:
The U.S. Analyst Focus List is updated monthly. Names may be removed mid-month when a valuation target has been largely or wholly achieved, or the original rationale is no longer valid. New ideas can also be added mid-month. Analysts will publish the explanation for all mid-month changes in a research note.
We screened the July Analyst Focus List, and to our surprise, one of our favorite dividend stocks was added this month. We cover the new addition and found four more companies on the list that pay dependable dividends, and in some cases, big ones.
Why do we recommend J.P. Morgan’s Analyst Focus List stocks?
J.P. Morgan is one of the acknowledged leaders in the investment landscape on Wall Street and worldwide. The firm’s top-notch research department continues to provide institutional and high-net-worth clients with the best ideas across the investment spectrum and is likely to do so for years to come.
EPR Properties This real estate investment trust (REIT) invests in some of the most popular entertainment companies and is the newest addition to the J.P. Morgan Equity Analysts Focus List. EPR Properties (NYSE: EPR | EPR Price Prediction) is a leading experiential net-lease real estate investment trust specializing in select enduring experiential properties and pays a 6.02% dividend. EPR recently increased its monthly dividend by 5.1% and expects FFO per share growth of more than 5% in 2026, supporting continued dividend increases. After suspending its dividend during COVID, it has recovered with five consecutive years of increases. Its $6.9 billion property portfolio generates solid cash flow, and the monthly dividend of $0.31 per share is well-covered by funds from operations.
J.P. Morgan gave this brief reason for adding the shares: “High dividend yield >6% that we see as safe and growing, with earnings growth likely to be toward the top of the net-lease REIT peer group.”
The company operates through two segments. The Experiential segment consists of approximately:
148 theater properties 59 eat and play properties 25 attraction properties 11 ski properties Four experiential lodging properties One gaming property One cultural property 22 fitness and wellness properties The Education segment comprises 46 early childhood education centers and nine private schools.
EPR Properties’ investment portfolio includes ownership of and long-term mortgages on experiential and educational properties. The company has investments in approximately 44 states. All the company’s owned single-tenant properties are leased on long-term, triple-net terms.
The J.P. Morgan price target is $62.
And More Here are four additional companies on the list that are steady dividend-paying stocks trading at reasonable valuations.
Annaly Capital With a massive 1240% dividend yield and trading right near the J.P. Morgan target price, Annaly Capital Management (NYSE: NLY) is a total passive-income play. The company is a diversified capital manager with investment strategies across the mortgage finance sector.
It owns a portfolio of real estate-related investments, including:
Mortgage pass-through certificates Collateralized mortgage obligations Credit risk transfer (CRT) securities Securities representing interests in or obligations backed by pools of mortgage loans, residential mortgage loans, and mortgage servicing rights Its investment groups include:
Annaly Agency Group, which invests in agency mortgage-backed securities collateralized by residential mortgages. Annaly Residential Credit Group invests in non-agency residential mortgage assets within residential and commercial markets. Annaly Mortgage Servicing Rights Group invests in MSR, which grants the right to service residential mortgage loans in exchange for a portion of the interest payments on those loans. The $24 J.P. Morgan price target is likely to go higher.
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AT&T AT&T (NYSE: T) is the world’s fourth-largest telecommunications company, measured by revenue. The legacy telecommunications company has undergone a lengthy restructuring process while maintaining a solid dividend yield of 5.42%. Thirteen analysts have given the stock a Buy rating, reflecting broad Wall Street support. AT&T provides a range of telecommunications, media, and technology services worldwide. Its Communications segment offers wireless voice and data communications services.
AT&T sells through its company-owned stores, agents, and third-party retail stores:
Handsets Wireless data cards Wireless computing devices Carrying cases Hands-free devices AT&T also provides:
Data Voice SecuT Cloud solutions Outsourcing Managed and provided professional services Customer premises equipment for multinational corporations, small and mid-sized businesses, and governmental and wholesale customers Additionally, this segment provides residential customers with fiber broadband and legacy voice telephony services.
It markets its communications services and products under:
AT&T Cricket AT&T Prepaid AT&T Fiber The company’s Latin America segment provides wireless services in Mexico and video services throughout the region. This segment markets its services and products under the AT&T and Unefon brands.
J.P. Morgan has a $34 price target for the stock.
First Industrial Realty Trust While off most people’s radar, this REIT pays a solid 2.94% dividend and offers decent upside to J.P. Morgan’s target. First Industrial Realty Trust (NYSE: FR) is a self-administered and fully integrated real estate company. The company is an owner, operator, developer, and acquirer of logistics properties. Through its fully integrated operating and investing platform, it provides facilities and customer service to multinational corporations and regional firms that are essential for their supply chains.
In total, the company owns and has under development approximately 71.6 million square feet of industrial space concentrated in 15 target MSAs. Its tenants are engaged in a variety of businesses, including:
E-commerce Third-party logistics and transportation Consumer and other manufactured products Retail and consumer services Food and beverage Lumber and building materials Wholesale goods Health services Governmental and other Through a wholly owned taxable REIT subsidiary of the operating partnership, the operating partnership owns an equity interest in a joint venture. The company also provides various services to the joint venture.
The J.P. Morgan target price is $70.
Kontoor Brands While another off-the-radar stock, Kontoor Brands (NYSE: KTB), has tremendous upside and well-known brands, it pays a reasonable 2.47% dividend. The global lifestyle apparel company designs, manufactures, procures, sells, and licenses apparel, footwear, and accessories. Its lifestyle, outdoor, and workwear brands include Wrangler, Lee, and Helly Hansen.
The Wrangler brand offers multiple sub-brands, collections, and product lines within the Wrangler brand to target specific consumer demographics and consumer end-users, including:
20X Aura from the Women at Wrangler Cowboy Cut Premium Patch Riggs Workwear Rock 47 Rustler Wrangler Retro Wrangler Rugged Wear Wrangler All Terrain Gear The Lee segment offers denim, apparel, footwear, and accessories for adults and children. The Lee brand offers multiple sub-brands, collections, and product lines, including:
Lee101 Riders Storm Rider Lee MVP Lee X The Helly Hansen brand is an outdoor and workwear brand. Sub-brands include Helly Hansen Sport and Helly Hansen Workwear.
J.P. Morgan has set a price target of $90.
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Have you been searching for a stock that might be well-positioned to maintain its earnings-beat streak in its upcoming report? It is worth considering Annaly Capital Management (NLY - Free Report) , which belongs to the Zacks REIT and Equity Trust industry.
When looking at the last two reports, this real estate investment trust has recorded a strong streak of surpassing earnings estimates. The company has topped estimates by 2.74%, on average, in the last two quarters.
For the most recent quarter, Annaly was expected to post earnings of $0.74 per share, but it reported $0.76 per share instead, representing a surprise of 2.70%. For the previous quarter, the consensus estimate was $0.72 per share, while it actually produced $0.74 per share, a surprise of 2.78%.
Price and EPS Surprise
For Annaly, estimates have been trending higher, thanks in part to this earnings surprise history. And when you look at the stock's positive Zacks Earnings ESP (Expected Surprise Prediction), it's a great indicator of a future earnings beat, especially when combined with its solid Zacks Rank.
Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven.
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.
Annaly has an Earnings ESP of +1.01% at the moment, suggesting that analysts have grown bullish on its near-term earnings potential. When you combine this positive Earnings ESP with the stock's Zacks Rank #2 (Buy), it shows that another beat is possibly around the corner. The company's next earnings report is expected to be released on July 21, 2026.
With the Earnings ESP metric, it's important to note that a negative value reduces its predictive power; however, a negative Earnings ESP does not indicate an earnings miss.
Many companies end up beating the consensus EPS estimate, but that may not be the sole basis for their stocks moving higher. On the other hand, some stocks may hold their ground even if they end up missing the consensus estimate.
Because of this, it's really important to check a company's Earnings ESP ahead of its quarterly release to increase the odds of success. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
NEW YORK--(BUSINESS WIRE)--Annaly Capital Management, Inc. (NYSE:NLY) (“Annaly” or the “Company”) announced today that it will release its financial results for the quarter ended June 30, 2026 after the market close on Tuesday, July 21, 2026. The Company will conduct a conference call and audio webcast to discuss the results on Wednesday, July 22, 2026 at 9:00 a.m. Eastern Time.
Participants are encouraged to pre-register for the conference call to receive a unique PIN to gain immediate access to the call and bypass the live operator. Pre-registration may be completed by accessing the Pre-Registration link found on the “Investors” section of the Company’s website at www.annaly.com, or by using the following link: https://registrations.events/direct/IDX71212727.
Pre-registration may be completed at any time, including up to and after the call start time.
Participants who would like to join the call but have not pre-registered can do so on the day of the event by dialing the numbers provided below and requesting the “Annaly Capital Management Call.”
A replay of the call will be available for one week following the conference call.
If you would like to be added to the e-mail distribution list, please visit www.annaly.com, click on News & Insights, then click on Subscribe and complete the email notification form.
About Annaly
Annaly is a leading diversified capital manager with investment strategies across mortgage finance. Annaly’s principal business objective is to generate net income for distribution to its stockholders and to optimize its returns through prudent management of its diversified investment strategies. Annaly is internally managed and has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. Additional information on the company can be found at www.annaly.com.
Annaly Capital Management (NLY - Free Report) closed the most recent trading day at $22.95, moving +1.73% from the previous trading session. This change outpaced the S&P 500's 0.05% loss on the day. On the other hand, the Dow registered a loss of 0.09%, and the technology-centric Nasdaq decreased by 0.24%.
Shares of the real estate investment trust witnessed a gain of 4.44% over the previous month, beating the performance of the Finance sector with its gain of 2.3%, and the S&P 500's loss of 1.42%.
Investors will be eagerly watching for the performance of Annaly Capital Management in its upcoming earnings disclosure. It is anticipated that the company will report an EPS of $0.74, marking a 1.37% rise compared to the same quarter of the previous year. In the meantime, our current consensus estimate forecasts the revenue to be $488 million, indicating a 78.62% growth compared to the corresponding quarter of the prior year.
For the full year, the Zacks Consensus Estimates are projecting earnings of $2.98 per share and revenue of $1.93 billion, which would represent changes of +2.05% and +69.62%, respectively, from the prior year.
Investors should also take note of any recent adjustments to analyst estimates for Annaly Capital Management. These revisions typically reflect the latest short-term business trends, which can change frequently. Consequently, upward revisions in estimates express analysts' positivity towards the business operations and its ability to generate profits.
Our research reveals that these estimate alterations are directly linked with the stock price performance in the near future. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.
The Zacks Rank system, stretching from #1 (Strong Buy) to #5 (Strong Sell), has a noteworthy track record of outperforming, validated by third-party audits, with stocks rated #1 producing an average annual return of +25% since the year 1988. Over the last 30 days, the Zacks Consensus EPS estimate has remained unchanged. As of now, Annaly Capital Management holds a Zacks Rank of #3 (Hold).
Valuation is also important, so investors should note that Annaly Capital Management has a Forward P/E ratio of 7.58 right now. This signifies a discount in comparison to the average Forward P/E of 8.69 for its industry.
One should further note that NLY currently holds a PEG ratio of 6.89. The PEG ratio is akin to the commonly utilized P/E ratio, but this measure also incorporates the company's anticipated earnings growth rate. NLY's industry had an average PEG ratio of 1.38 as of yesterday's close.
The REIT and Equity Trust industry is part of the Finance sector. This group has a Zacks Industry Rank of 209, putting it in the bottom 15% of all 250+ industries.
The Zacks Industry Rank assesses the vigor of our specific industry groups by computing the average Zacks Rank of the individual stocks incorporated in the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
Keep in mind to rely on Zacks.com to watch all these stock-impacting metrics, and more, in the succeeding trading sessions.
Annaly Capital Management is well-positioned for double-digit EAD growth and offers a compelling 13.5% dividend yield, recently increased. NLY's diversified platform—Agency MBS, Residential Credit, and MSR—enhances growth prospects and provides countercyclical cash flow stability. Valuation is attractive at 1.1x book value, with a price target of $24.60/share, implying 9.5% upside and a total return prospect of 23%.
Agency MBS assets provide a unique investment opportunity with minimal credit risk. Agency mREITs leverage agency MBS with a business model that has low exposure to credit risk but high exposure to interest rate changes. As the interest rate curve normalizes, NLY has benefited, recently raising its dividend.
Key Takeaways NLY offers a high dividend yield of around 12.59%, supported by REIT payout requirements.NLY raised its quarterly dividend 7.1% to 75 cents per share in June 2026.NLY holds $106.7B in investments, mainly Agency MBS, supporting portfolio stability. One of the most closely tracked aspects of Annaly Capital Management’s (NLY - Free Report) financial profile is its dividend policy. As a publicly traded mortgage real estate investment trust (mREIT), the company is closely followed for its high dividend yield and steady income generation, which continue to attract income-focused investors.
REIT stocks generally attract strong interest from income-focused investors, given the U.S. requirement for REITs to distribute at least 90% of taxable income as dividends. Annaly currently offers a high dividend yield of around 12.59%.
Dividend Yield
Image Source: Zacks Investment Research
Last week, the company raised its quarterly cash dividend by 7.1% to 75 cents per share. The dividend will be paid out on July 31, 2026, to shareholders of record on June 30. Prior to this increase, in March 2025, it had boosted its dividend by 7.7% to 70 cents per share. Over the past five years, Annaly has increased its dividend twice and maintains a payout ratio of 95%, indicating that a substantial portion of earnings continues to be returned to shareholders.
Apart from dividends, NLY has a share repurchase plan in place. On Jan. 31, 2025, the company’s board of directors authorized a new common share repurchase program of up to $1.5 billion, which expires on Dec. 31, 2029. Although the company has not repurchased shares under the program since its announcement, the authorization provides management with flexibility to enhance shareholder value when market conditions are favorable.
A key driver supporting the sustainability of Annaly’s dividend is its disciplined investment strategy and strong portfolio composition. As of March 31, 2026, the company’s investment portfolio stood at $106.7 billion, of which $92.2 billion consisted of highly liquid Agency mortgage-backed securities (MBS). Given the government-backed nature of Agency MBS, these assets generally carry lower credit risk while supporting stable risk-adjusted returns in the fixed-income markets.
In addition to its portfolio strength, Annaly Capital Management also maintains a healthy liquidity position that enhances its ability to navigate market volatility. As of March 31, 2026, the company reported $9 billion in assets available for financing, including $5 billion in cash and unencumbered Agency mortgage-backed securities.
Given its strong liquidity position, sizable Agency MBS portfolio and disciplined capital management framework, Annaly appears well-positioned to sustain its capital distribution strategy and continue supporting its attractive dividend profile.
How NLY Stacks Up Against AGNC & ABRAnnaly’s peers, such as AGNC Investment Corp. (AGNC - Free Report) and Arbor Realty Trust, Inc. (ABR - Free Report) , have also been focusing on maintaining shareholder returns through consistent dividend payouts.
AGNC Investment has a dividend yield of 13.8%. As of March 31, 2026, its liquidity, including unencumbered cash and Agency MBS, was $7 billion, supporting the sustainability of its dividend policy.
Meanwhile, Arbor Realty has a dividend yield of 13.2%. However, its liquidity position remains comparatively weak. As of March 31, 2026, Arbor Realty held cash and cash equivalents of $407.1 million against long-term debt of $6.3 billion. Such a narrow liquidity cushion raises concerns about the sustainability of its dividend in the long term.
Annaly’s Price Performance & Zacks RankOver the past year, NLY shares have gained 16.9% compared with the industry’s growth of 3.4%.
Price Performance
Image Source: Zacks Investment Research
The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the latest close session, Annaly Capital Management (NLY - Free Report) was up +1.09% at $22.24. The stock lagged the S&P 500's daily gain of 1.65%. At the same time, the Dow added 0.92%, and the tech-heavy Nasdaq gained 3.07%.
Prior to today's trading, shares of the real estate investment trust had gained 1.48% lagged the Finance sector's gain of 2.86% and outpaced the S&P 500's gain of 0.48%.
The investment community will be paying close attention to the earnings performance of Annaly Capital Management in its upcoming release. The company is predicted to post an EPS of $0.74, indicating a 1.37% growth compared to the equivalent quarter last year. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $488 million, up 78.62% from the year-ago period.
Regarding the entire year, the Zacks Consensus Estimates forecast earnings of $2.98 per share and revenue of $1.93 billion, indicating changes of +2.05% and +69.62%, respectively, compared to the previous year.
Investors might also notice recent changes to analyst estimates for Annaly Capital Management. Such recent modifications usually signify the changing landscape of near-term business trends. Hence, positive alterations in estimates signify analyst optimism regarding the business and profitability.
Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.
The Zacks Rank system, stretching from #1 (Strong Buy) to #5 (Strong Sell), has a noteworthy track record of outperforming, validated by third-party audits, with stocks rated #1 producing an average annual return of +25% since the year 1988. Over the past month, there's been no change in the Zacks Consensus EPS estimate. Annaly Capital Management is holding a Zacks Rank of #3 (Hold) right now.
Digging into valuation, Annaly Capital Management currently has a Forward P/E ratio of 7.39. This denotes a discount relative to the industry average Forward P/E of 8.87.
We can also see that NLY currently has a PEG ratio of 6.72. The PEG ratio is akin to the commonly utilized P/E ratio, but this measure also incorporates the company's anticipated earnings growth rate. The average PEG ratio for the REIT and Equity Trust industry stood at 1.46 at the close of the market yesterday.
The REIT and Equity Trust industry is part of the Finance sector. With its current Zacks Industry Rank of 211, this industry ranks in the bottom 14% of all industries, numbering over 250.
The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
Remember to apply Zacks.com to follow these and more stock-moving metrics during the upcoming trading sessions.
NEW YORK--(BUSINESS WIRE)--In accordance with the terms of Annaly’s 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”), the Board has declared a Series F Preferred Stock cash dividend for the second quarter of 2026 of $0.559639 per share of Series F Preferred Stock, which reflects a rate of 8.95422%, equal to three-month CME Term SOFR (plus a spread adjustment of 0.26161%) on the Dividend Determination date plus a spread of 4.993%.
In accordance with the terms of Annaly’s 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series G Preferred Stock”), the Board has declared a Series G Preferred Stock cash dividend for the second quarter of 2026 of $0.513974 per share of Series G Preferred Stock, which reflects a rate of 8.13322%, equal to three-month CME Term SOFR (plus a spread adjustment of 0.26161%) on the Dividend Determination date plus a spread of 4.172%.
In accordance with the terms of Annaly’s 6.75% Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series I Preferred Stock”), the Board has declared a Series I Preferred Stock cash dividend for the second quarter of 2026 of $0.565604 per share of Series I Preferred Stock, which reflects a rate of 8.95022%, equal to three-month CME Term SOFR (plus a spread adjustment of 0.26161%) on the Dividend Determination date plus a spread of 4.989%.
In accordance with the terms of Annaly’s 8.875% Series J Cumulative Redeemable Preferred Stock (“Series J Preferred Stock”), the Board has declared a Series J Preferred Stock cash dividend for the second quarter of 2026 of $0.560851 per share of Series J Preferred Stock.
Dividends for the Series F Preferred Stock, Series G Preferred Stock, Series I Preferred Stock, and Series J Preferred Stock are payable on June 30, 2026 to preferred shareholders of record as of June 1, 2026.
About Annaly
Annaly is a leading diversified capital manager with investment strategies across mortgage finance. Annaly’s principal business objective is to generate net income for distribution to its stockholders and to optimize its returns through prudent management of its diversified investment strategies. Annaly is internally managed and has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. Additional information on the company can be found at www.annaly.com.
Forward-Looking Statements
This news release and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “should,” “estimate,” “project,” “believe,” “expect,” “anticipate,” “continue,” or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities and other securities for purchase; the availability of financing and, if available, the terms of any financing; changes in the market value of our assets; changes in business conditions and the general economy; our ability to grow our residential credit business; our ability to grow our mortgage servicing rights business; credit risks related to our investments in credit risk transfer securities and residential mortgage-backed securities and related residential mortgage credit assets; risks related to investments in mortgage servicing rights; the our ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting our business; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940; and operational risks or risk management failures by us or critical third parties, including cybersecurity incidents. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law.
Annaly Capital (NLY 0.04%) is a behemoth among mortgage-focused real estate investment trusts (REITs). It has the largest market cap in the sector and is 12 times the size of its average peer.
Almost everything about Annaly Capital is big, including its dividend yield, which at around 13% is more than 10 times higher than the S&P 500's 1.1% yield. A high dividend yield typically suggests that a stock trades at a discount. However, Annaly's book value tells a different story.
Image source: Getty Images.
Digging into Annaly's book value Annaly Capital ended the first quarter with a total investment portfolio of $106.7 billion, up $2 billion from the end of last year. Most of its portfolio -- $92.2 billion -- was Agency mortgage-backed securities (MBS; pools of residential mortgages guaranteed against credit losses by government agencies such as Fannie Mae). The leading mortgage REIT also had $10.3 billion in residential credit investments (non-Agency residential mortgages) and $4.2 billion of mortgage servicing rights (MSR; the obligation to service residential loans for a fixed servicing fee). While its Agency MBS portfolio declined slightly in the quarter, Annaly grew its residential credit and MSR portfolios by 30% and 9%, respectively.
The REIT has invested $16.3 billion of shareholder capital in its portfolio, with the remaining funded by leverage. After subtracting its liabilities from its assets, Annaly's book value was $19.82 per share at the end of the first quarter. That's down from $20.21 per share at the end of last year. Annaly's book value is below its recent share price of more than $21.50 per share. That suggests investors are willing to pay a little more for Annaly because of the quality of its portfolio and operations.
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What this means for the dividend's sustainability Annaly's stock has traded at a premium to its book value over the past year. That has enabled the REIT to raise capital by selling shares and deploy it into accretive investments. For example, it raised $509 million in capital during the first quarter. CEO David Finkelstein noted on the first quarter conference call that the "capital raise was specifically related to Resi Credit and MSR in real time." He stated that "we felt it was highly productive to raise capital, and we did so." It deployed that capital into a couple of billion dollars of residential credit investments and nearly $400 million of MSR. By deliberately selling stock above book value and earmarking it for opportunistic investments, the company was able to grow its long-term earnings capacity.
The REIT's earnings available for distribution (EAD) came in at $0.76 per share during the quarter, well in excess of its $0.70 per share dividend. EAD has grown over the past year, from $0.72 per share in the first quarter of 2025 to $0.74 per share by the end of the year. The rise in the REIT's EAD allowed it to raise its dividend by nearly 8% early last year. That marked a notable turnaround for a company that had cut its payout several times previously.
Annaly might not be cheap, but the dividend looks safe Annaly currently trades at a premium to its book value. However, that benefits the REIT by allowing it to raise capital to make accretive investments, thereby growing its EAD. With its EAD rising, its big-time dividend is growing more sustainable.
Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
A month has gone by since the last earnings report for Annaly Capital Management (NLY - Free Report) . Shares have lost about 4.7% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Annaly due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent drivers for Annaly Capital Management Inc before we dive into how investors and analysts have reacted as of late.
Annaly Q1 Earnings Beat Estimates, Net Interest Margin Improves Y/YAnnaly reported first-quarter 2026 earnings available for distribution per average share of 76 cents, which beat the Zacks Consensus Estimate of 74 cents. The figure increased from 72 cents in the year-ago quarter.
The company’s net interest income and net interest margin improved year over year in the reported quarter. Notably, the year-over-year increase in book value per common share was also encouraging. However, a lower economic capital ratio was concerning.
Net income available to common stockholders was $242 million compared with $87.1 million in the year-ago period.
Inside Annaly’s HeadlinesNet interest income was $452.7 million in the reported quarter, which lagged the Zacks Consensus Estimate by 8.4%. In the prior-year quarter, the company reported NII of $220 million.
Net interest spread (excluding PAA) of 1.42% in the first quarter increased from 1.35% in the prior-year quarter.
Annaly’s BVPS was $19.82 as of March 31, 2026, up from $19.02 in the prior-year quarter. At the end of the reported quarter, the company’s economic capital ratio was 14.7%, down from 14.8% in the prior-year quarter.
In the first quarter, the weighted average actual constant prepayment rate was 10.2%, up from 7.1% in the year-ago quarter.
Annaly generated an annualized EAD return on average equity of 14.58% in the first quarter, which increased from the prior-year quarter’s 14.43%.
Annaly’s total portfolio was $106.7 billion in the quarter, including a $92.2-billion Agency portfolio. The Residential Credit portfolio increased 30% to $10.3 billion, while the MSR portfolio increased 9% to $4.2 billion.
LiquidityAnnaly maintained a disciplined leverage profile in the quarter, with GAAP leverage at 7.3X and economic leverage at 5.7X, both modestly higher than the prior quarter’s levels. The company also reported total stockholders’ equity of $16.3 billion as of the quarter-end.
Liquidity remained a focal point, given ongoing macro and rate volatility. Annaly ended the quarter with $9 billion in total assets available for financing, including $5 billion in cash and unencumbered Agency MBS. This flexibility matters for a mortgage REIT because it helps sustain funding access and supports portfolio repositioning as market conditions shift.
HedgingAgainst a volatile rate environment, the company kept its hedge posture relatively steady. The company ended the quarter with a hedge ratio of 87%, while maintaining an $81-billion hedge portfolio that was broadly in line with the prior quarter.
Funding costs improved modestly, supporting underlying spread dynamics. Average economic costs of interest-bearing liabilities were 3.93% in the quarter, while the net interest margin (excluding PAA) was 1.71% compared with 1.69% in the first quarter of 2025. Average yield on interest-earning assets, excluding the premium amortization adjustment, was 5.35%, highlighting how asset yields continued to run ahead of funding costs as the company balanced carry opportunities with risk management.
Dividend Coverage & Capital RaisingA key highlight for income-focused investors was that earnings again exceeded the common dividend. Annaly declared a quarterly common stock cash dividend of 70 cents per share for the first quarter, supported by its earnings available for distribution.
The company also leaned on equity issuance to support growth. Annaly raised $509 million through its at-the-market sales program during the quarter, which management characterized as accretive, and framed the move as part of its broader approach to disciplined portfolio management.
How Have Estimates Been Moving Since Then?Since the earnings release, investors have witnessed a upward trend in estimates revision.
VGM ScoresAt this time, Annaly has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock has a score of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
OutlookEstimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Annaly has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Key Takeaways NLY offers a 12.99% dividend yield with a 95% payout ratio, reflecting a high-income distribution model.NLY increased its quarterly dividend 7.7% in March 2025, signaling confidence in its earnings capacity.NLY maintains $9B in available assets and Agency MBS, supporting liquidity and near-term dividend stability. One of the most closely watched aspects of Annaly Capital Management. Inc.’s (NLY - Free Report) financial profile is its dividend policy. As a publicly traded mortgage real estate investment trust (mREIT), the company has historically delivered attractive shareholder returns while maintaining a high dividend yield that continues to attract income-focused investors.
Income-oriented investors generally favor REIT stocks because U.S. law requires these companies to distribute at least 90% of their annual taxable income as dividends. Against this backdrop, Annaly Capital’s dividend yield currently stands at 12.99%, making the stock appealing for investors seeking steady income streams. Further, its payout ratio of 95% highlights the company’s commitment to consistent shareholder distributions. In March 2025, Annaly Capital increased its quarterly cash dividend by 7.7% to 70 cents per share, reflecting management’s confidence in the company’s earnings capacity and long-term capital return strategy.
Dividend Yield
Image Source: Zacks Investment Research
Apart from dividends, Annaly Capital also has a share repurchase plan in place. On Jan. 31, 2025, the company’s board of directors authorized a new common share repurchase program that allows repurchases of up to $1.5 billion of outstanding common stock through Dec. 31, 2029. However, the company has not repurchased shares under the program since its announcement.
Annaly Capital also enjoys a decent liquidity position. As of March 31, 2026, the company had $9 billion of total assets available for financing, including cash and unencumbered Agency mortgage-backed securities (MBS) of $5 billion. These assets can readily provide liquidity during periods of adverse market conditions or economic stress.
Given its strong liquidity profile, disciplined capital management initiatives and sizable allocation toward highly liquid Agency MBS, Annaly Capital appears well-positioned to sustain its dividend payments in the near term.
How NLY Compares With AGNC & STWD on Dividend StrengthNLY operates alongside peers such as AGNC Investment Corp. (AGNC - Free Report) and Starwood Property Trust, Inc. (STWD - Free Report) , which also prioritize shareholder returns through consistent dividend payouts.
AGNC Investment offers a dividend yield of 14.05% and maintains a payout ratio of 96%. It holds a solid liquidity position, with $7 billion in cash and unencumbered Agency mortgage-backed securities as of March 31, 2026. It also maintains flexible access to diverse funding sources and opportunistic financing, supporting portfolio adjustments.
Additionally, AGNC Investment has an active share repurchase program authorized for up to $1 billion through Dec. 31, 2026, with full authorization remaining available. The company plans to execute buybacks when its stock trades below tangible net book value, offering a potential buffer to shareholder value during volatility.
On the other hand, Starwood Property offers a dividend yield of 11.20% with a payout ratio of 127%. While the company has announced a $400 million share repurchase authorization in February 2026, its liquidity position remains relatively weak.
As of March 31, 2026, Starwood Property held $666.1 million in cash, cash equivalents and restricted cash against total debt of $23.1 billion. This narrow liquidity buffer raises concerns around financial flexibility and increases sensitivity to refinancing risk if macroeconomic conditions deteriorate.
Annaly Capital’s Price Performance & Zacks RankOver the past six months, NLY shares have gained 15.1% compared with the industry’s growth of 3.7%.
Price Performance
Image Source: Zacks Investment Research
The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Annaly Capital Management, Inc. maintains its $0.70 per-share dividend, supported by growing net interest spread and strong earnings coverage. NLY's net interest spread improved for the fourth consecutive time in the last year, reaching 1.07%, driven by lower financing costs and stable asset yields. NLY shares trade at a 9% premium to book value, reflecting improved spreads and expectations of future rate cuts benefiting MBS investors.
Dividend investors often start their search for stocks by looking at dividend yields. That's a logical move given their income focus, but there's a risk that yield becomes more important than other factors that can also have a material impact on an investor's long-term results. Annaly Capital (NLY 0.04%) and AGNC Investment (AGNC +0.10%), with their huge double-digit yields, need extra careful vetting.
For reference, the S&P 500 index (^GSPC +0.50%) is yielding roughly 1.1% today. The average financial stock yields 1.5%. The average real estate investment trust (REIT) yields 3.6%. Mortgage REITs Annaly and AGNC yield 12.9% and 13.9%, respectively. Here are some key things to consider before buying either of these two mortgage REITs, and why you might prefer one over the other.
Image source: Getty Images.
What do mortgage REITs do? A property-owning REIT buys physical assets, such as office buildings, and then leases them to tenants. The core business of mortgage REITs like Annaly and AGNC is owning mortgage securities that have been pooled together into bond-like investments. In some ways, a mortgage REIT, which manages a portfolio of mortgage securities, is similar to a bond fund. Notably, both Annaly and AGNC highlight total return as a key goal.
This is important for dividend lovers. While most property-owning REITs focus on providing reliable, and often steadily growing, dividends, the dividend histories of Annaly and AGNC have been highly volatile. There have been long periods where dividends have steadily declined.
AGNC data by YCharts
If you are trying to live off the income your portfolio generates, neither of these two mREITs will be good choices for you, despite their massive yields. Worse, the stock prices of these mREITs have tended to follow their dividends both higher and lower. Overall, investors who spent the dividend have been left with less income and less capital. However, that does not mean that these companies are poorly run.
Investors that reinvested their dividends, focusing on total return, have been well rewarded. Both Annaly and AGNC have delivered total returns similar to those of the S&P 500 index. Notably, the return profiles of both mREITs differ from that of the S&P 500, so they may provide valuable diversification benefits for investors focused on asset allocation.
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Which is the better mREIT: Annaly or AGNC? Assuming you focus on total return rather than a consistent income stream, your choice between Annaly and AGNC will likely come down to one key preference. AGNC is fully focused on owning and managing its portfolio of agency mortgage securities. The term "agency" indicates that these mortgages are guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. The key is that there is no credit risk associated with such loans. That said, the portfolio's value fell 5.6% in the first quarter of 2026. That resulted in a negative 1.8% economic return for investors, as the $0.50 per share drop in book value more than offset the $0.36 in dividends paid in the quarter. Diversification has its benefits.
Annaly's business is heavily focused on its portfolio of agency mortgage securities, but it also operates two other lines of business. Annaly's residential credit business oversees a portfolio of non-agency mortgages. It makes loans, securitizes loans, and manages a portfolio of loans. Annaly also operates a mortgage servicing business, which simply collects fees for processing mortgage payments. It is a fairly consistent cash flow generator and provides some offset for the increased risk associated with the company's non-agency mortgage operation. In the first quarter, Annaly's economic return was 1.5%, with a book value decline of $0.39 per share more than offset by dividends of $0.70.
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At the end of the day, investors seeking exposure to agency mortgage-backed securities will likely prefer AGNC Investment. Investors that focus on diversification, however, will probably lean toward Annaly and its more diverse business model.
Make sure you know what you own Annaly and AGNC have double-digit yields, but neither is a particularly reliable dividend stock. That should keep most dividend investors on the sidelines. However, they both have solid total return histories, with AGNC being the more focused business and Annaly the more diversified operation. If you are using an asset allocation approach, either of these two mREITs could be a good fit for your portfolio. Your choice between them will likely boil down to your diversification preferences.
Annaly Capital faces potential NAV erosion from rising rates and term spread compression but currently trades near its historical valuation premium versus peers. Lower hedge ratios have increased NLY's interest rate sensitivity, worsening the outlook if policy rates rise or stay elevated. Ongoing equity issuance dilutes shareholders but is partly offset by redeployment into higher‑yielding assets instead of lower‑yield agency MBS.
Annaly Capital Management (NLY - Free Report) closed at $21.85 in the latest trading session, marking a +1.16% move from the prior day. The stock exceeded the S&P 500, which registered a gain of 0.22% for the day. Elsewhere, the Dow saw an upswing of 0.72%, while the tech-heavy Nasdaq appreciated by 0.21%.
Shares of the real estate investment trust have depreciated by 5.68% over the course of the past month, underperforming the Finance sector's gain of 1.12%, and the S&P 500's gain of 6.04%.
The upcoming earnings release of Annaly Capital Management will be of great interest to investors. It is anticipated that the company will report an EPS of $0.74, marking a 1.37% rise compared to the same quarter of the previous year. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $488 million, up 78.62% from the year-ago period.
For the full year, the Zacks Consensus Estimates project earnings of $2.98 per share and a revenue of $1.93 billion, demonstrating changes of +2.05% and +69.62%, respectively, from the preceding year.
It is also important to note the recent changes to analyst estimates for Annaly Capital Management. Such recent modifications usually signify the changing landscape of near-term business trends. As a result, upbeat changes in estimates indicate analysts' favorable outlook on the business health and profitability.
Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To take advantage of this, we've established the Zacks Rank, an exclusive model that considers these estimated changes and delivers an operational rating system.
The Zacks Rank system, stretching from #1 (Strong Buy) to #5 (Strong Sell), has a noteworthy track record of outperforming, validated by third-party audits, with stocks rated #1 producing an average annual return of +25% since the year 1988. Over the last 30 days, the Zacks Consensus EPS estimate has witnessed an unchanged state. Annaly Capital Management presently features a Zacks Rank of #3 (Hold).
Investors should also note Annaly Capital Management's current valuation metrics, including its Forward P/E ratio of 7.25. This represents a discount compared to its industry average Forward P/E of 8.75.
Investors should also note that NLY has a PEG ratio of 6.59 right now. Comparable to the widely accepted P/E ratio, the PEG ratio also accounts for the company's projected earnings growth. The average PEG ratio for the REIT and Equity Trust industry stood at 1.87 at the close of the market yesterday.
The REIT and Equity Trust industry is part of the Finance sector. This group has a Zacks Industry Rank of 214, putting it in the bottom 13% of all 250+ industries.
The strength of our individual industry groups is measured by the Zacks Industry Rank, which is calculated based on the average Zacks Rank of the individual stocks within these groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
Don't forget to use Zacks.com to keep track of all these stock-moving metrics, and others, in the upcoming trading sessions.
Mortgage real estate investment trust (REIT) Annaly Capital (NLY 0.04%) has a shockingly large 12.9% dividend yield. For reference, the S&P 500 index (^GSPC +0.50%) has a yield of just 1.1% today. The average REIT has a yield of 3.6%. If you are looking at Annaly's juicy yield today, you need to be worried about interest rates.
The next rate move could be higher While consumers appear to be worried about a recession, tightening their budgets, inflation is running hot. Rising inflation could force the Federal Reserve to increase interest rates. A key part of Annaly Capital's business model is to borrow money short-term so it can buy long-term mortgage securities. If rates rise, the company's interest costs go up even though its interest income doesn't change. That would leave less money to pay dividends.
Image source: Getty Images.
To protect itself from interest rate volatility, the company hedges its portfolio. At the end of the first quarter of 2026, 87% of the portfolio was hedged, down from 90% at the end of 2025 and 95% in the first quarter of 2025. The company's hedging covers a range of different time periods, from short-term to long-term; the majority of its activity (45%) is at the short end.
Protecting the dividend is a complicated job Annaly assumed "a conservative hedge profile throughout the quarter given elevated rate and macro volatility." None of the first quarter's uncertainty has receded at this point, so it is highly likely that the mortgage REIT is still taking the same conservative approach. That's a positive for investors looking at the stock, since it suggests that Annaly will be able to continue paying its dividend in the near term even if rates change dramatically.
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That said, long-term dividend investors should tread with caution here. While Annaly's yield is attractive, the dividend has a history of volatility. The company is well-respected, but the real investment story is total return, which requires dividend reinvestment. In fact, from a total return perspective, the stock has outperformed the S&P 500 since Annaly's initial public offering. However, the dividend and stock price are both lower today than they were 10 years ago. In other words, if you spent the dividend, you would have been left with less income and less capital.
Safe for now, risky over the long term The big-picture story is that Annaly appears to be taking a prudent approach to its portfolio, actively hedging its near-term interest rate risk. That should allow it to support its dividend through the current market uncertainty, even if that uncertainty leads to rate changes. However, if you are a dividend investor using dividends to pay for living expenses, that still isn't enough to make this ultra-high-yield mREIT a reliable choice for long-term income.
Annaly Capital Management preferred shares, particularly NLY-G, are among the sector's least risky but currently trade at unattractive valuations. NLY-G offers an 8.22% yield but a negative yield to call, making it less compelling than baby bonds or other preferreds with higher yields and better risk profiles. The low floating spread on NLY-G means dividend income could fall sharply if short-term rates decline, amplifying downside risk in a rate-cut scenario.
Annaly Capital Management (NLY - Free Report) closed at $20.96 in the latest trading session, marking a -1.23% move from the prior day. This change lagged the S&P 500's 0.3% gain on the day. Elsewhere, the Dow lost 0.16%, while the tech-heavy Nasdaq added 0.86%.
Prior to today's trading, shares of the real estate investment trust had lost 6.15% lagged the Finance sector's gain of 1.34% and the S&P 500's gain of 1.92%.
The upcoming earnings release of Annaly Capital Management will be of great interest to investors. The company's upcoming EPS is projected at $0.74, signifying a 1.37% increase compared to the same quarter of the previous year. Our most recent consensus estimate is calling for quarterly revenue of $488 million, up 78.62% from the year-ago period.
For the annual period, the Zacks Consensus Estimates anticipate earnings of $2.98 per share and a revenue of $1.93 billion, signifying shifts of +2.05% and +69.62%, respectively, from the last year.
Any recent changes to analyst estimates for Annaly Capital Management should also be noted by investors. Such recent modifications usually signify the changing landscape of near-term business trends. As a result, upbeat changes in estimates indicate analysts' favorable outlook on the business health and profitability.
Based on our research, we believe these estimate revisions are directly related to near-term stock moves. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.
The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Over the past month, there's been no change in the Zacks Consensus EPS estimate. Annaly Capital Management is currently sporting a Zacks Rank of #3 (Hold).
Valuation is also important, so investors should note that Annaly Capital Management has a Forward P/E ratio of 7.13 right now. This expresses a discount compared to the average Forward P/E of 8.55 of its industry.
We can also see that NLY currently has a PEG ratio of 6.48. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The REIT and Equity Trust industry had an average PEG ratio of 1.46 as trading concluded yesterday.
The REIT and Equity Trust industry is part of the Finance sector. This group has a Zacks Industry Rank of 211, putting it in the bottom 14% of all 250+ industries.
The Zacks Industry Rank assesses the strength of our separate industry groups by calculating the average Zacks Rank of the individual stocks contained within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
To follow NLY in the coming trading sessions, be sure to utilize Zacks.com.
NEW YORK--(BUSINESS WIRE)--The Board of Directors of Annaly Capital Management, Inc. (NYSE: NLY) (“Annaly” or the “Company”) increased the second quarter 2026 common stock cash dividend to $0.75 per common share. This dividend is payable July 31, 2026, to common shareholders of record on June 30, 2026. The ex-dividend date is June 30, 2026.
“We are pleased to announce an increase in our common stock dividend from $0.70 to $0.75 per share, underscoring the strong performance of Annaly’s diversified housing finance portfolio and our focus on driving shareholder value,” remarked David Finkelstein, Chief Executive Officer & Co-Chief Investment Officer. “Our platform continues to deliver durable cash flows and superior risk-adjusted returns, enabled by our disciplined portfolio construction, proactive hedging and prudent capital structure.”
About Annaly
Annaly is a leading diversified capital manager with investment strategies across mortgage finance. Annaly’s principal business objective is to generate net income for distribution to its stockholders and to optimize its returns through prudent management of its diversified investment strategies. Annaly is internally managed and has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. Additional information on the company can be found at www.annaly.com.
Forward-Looking Statements
This news release and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “should,” “estimate,” “project,” “believe,” “expect,” “anticipate,” “continue,” or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities and other securities for purchase; the availability of financing and, if available, the terms of any financing; changes in the market value of our assets; changes in business conditions and the general economy; our ability to grow our residential credit business; our ability to grow our mortgage servicing rights business; credit risks related to our investments in credit risk transfer securities and residential mortgage-backed securities and related residential mortgage credit assets; risks related to investments in mortgage servicing rights; the our ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting our business; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940; and operational risks or risk management failures by us or critical third parties, including cybersecurity incidents. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law.
Annaly Capital Management (NLY +2.80%) already offers a monster 12.7% dividend yield. That's more than 10 times higher than the S&P 500's 1.1% yield. It's now boosting that payout by another 7.1%.
Here's a look at how the real estate investment trust (REIT) focused on residential mortgages can afford its big-time yield and whether investors should buy it for income.
Image source: Getty Images.
Another raise Annaly Capital Management recently declared its latest dividend. The mortgage REIT will pay $0.75 per share on July 31 to investors who hold shares as of June 30. That's a 7.1% raise from the $0.70 per share it paid last quarter. It will boost the REIT's forward dividend yield to 13.6% at its recent share price. In commenting on the increase, CEO David Finkelstein stated that it underscores "the strong performance of Annaly's diversified housing finance portfolio and our focus on driving shareholder value."
The dividend increase follows Annaly's steadily improving earnings. The company reported $0.76 per share of earnings available for distribution (EAD) during the first quarter. That was up from $0.74 per share last quarter and $0.72 per share in the prior year period. It's a continuation of the improvement in the REIT's earnings over the past few years:
Data source: Annaly Capital Management. Chart by the author.
With its earnings rising, ample investment opportunities in the current market environment, and a strong financial profile, Annaly now has the confidence to increase its dividend. It's the REIT's second raise in the past 18 months. However, the dividend remains well below its peak due to a series of cuts in prior years.
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Diversification is paying dividends Annaly's investment strategy differs from that of other residential mortgage REITs, such as AGNC Investment. Whereas AGNC Investment only invests in Agency MBS (mortgage-backed securities guaranteed against credit losses by government agencies such as Fannie Mae), Annaly also invests in residential credit (non-agency residential mortgage assets) and mortgage servicing rights (MSR).
That diversification gives it the flexibility to invest where it sees the best opportunities. For example, Annaly ended the first quarter with $92 billion in Agency investments, down marginally from the year-end level. The REIT opportunistically repositioned the portfolio during the quarter by rotating out of higher-yielding MBS and into lower-yielding MBS, which it expects will provide more durable cash flows. Meanwhile, it raised $510 million of equity during the quarter to capitalize on opportunities to grow its residential credit and MSR portfolios. It expanded its residential credit portfolio by 30% to $10.3 billion in the quarter, while its MSR portfolio grew by 9% to $4.2 billion. The company expects to continue growing these platforms.
A higher risk, higher reward income stock Annaly Capital's diversification strategy is paying off. The REIT is capitalizing on opportunities to grow its residential credit and MSR portfolios, helping drive earnings growth. That's enabling the REIT to increase its dividend. While Annaly is a higher-risk income stock (it has cut its dividend many times in the past), it's a good option for more risk-tolerant investors looking to buy income.
Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
