Annaly Capital Management Offers Investors 12% Dividend Yield (NLY)
By: Ned Piplovic,
Annaly Capital Management, Inc. (NYSE:NLY) — a diversified capital management company — currently offers its shareholders a 12% dividend yield, which is significantly above industry averages and has outperformed dividend yields of most industry peers.
The company’s annual dividend payout amount fluctuated significantly for the first 17 years after dividend initiation in 1997. However, the company has stabilized its annual distribution and has paid a stable dividend for the past six consecutive years.
Similar to its dividend payouts, the share price has oscillated over the past two decades since the company’s formation. However, the company’s current share price trades within 3% of the price from the end of 1997. While experiencing significant volatility and no overall advancement, the company’s share price settled into a steady pattern over most of the trailing twelve months. After an initial decline, the share spent the past 10 months trading in the narrow range between $9.70 and $10.70, with minimal volatility.
Investors that are looking for a source of reliable and steady income to complement the strong asset appreciation positions in their portfolio, should consider adding Annaly Capital Management as one of those income sources. The company will distribute its next round of quarterly dividend payouts on January 31, 2019. On that pay date, all shareholders of record prior to the December 28, 2018, ex-dividend date will be eligible to receive the dividend distribution.
Annaly Capital Management, Inc. (NYSE:NLY)
Based in New York, New York, and founded in 1996, Annaly Capital Management, Inc., is a real estate investment trust (REIT) that operates as a diversified capital manager. The company invests in various types of agency mortgage-backed securities, non-agency residential mortgage assets and residential mortgage loans. Additionally, the firm originates and invests in commercial mortgage loans, securities and other commercial real estate investments. Furthermore, Annaly Capital Management also provides financing to private-equity-backed middle market businesses and operates as a broker-dealer. The largest portion of company’s equity — 70% or $8.8 billion — is committed to its Annaly Agency Group business segment. This segment invests in agency Mortgage-Backed Securities (MBS) collateralized by residential mortgages which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. The company allocates the remaining equity fairly evenly between its remaining four business segments. Commercial Real Estate and Middle Market Lending represent approximately 9% or $1.1 billion each. Finally, The Annaly Residential Credit Group accounts for 12% of the company’s equity with $1.5 billion.
As already indicated, the share price declined 17% from its 52-week high of $10.38 on December 27, 2017, to a few pennies above the $10 mark by the end of February 2018. However, since February, the share price traded in a relatively narrow range between 4% above and 3% below that $10 level. The share price reached its 52-week low of $9.71 at the end of trading on December 24, 2018, and closed at $10.04 at the end of the December 26, 2018, trading session. This closing price was approximately 17% below its 52-week high from one year earlier, 3.4% above the 52-week low on Christmas Eve and just $0.04 higher than it was five years earlier.
The REIT has been paying a flat $0.30 quarterly payout over the past 21 consecutive periods. The current $1.20 annualized dividend amount corresponds to a 12% dividend yield. This new dividend yield is nearly 5% above the company’s own 11.4% average yield over the past five years.
Despite flat dividend payouts, the company’s current 12% dividend yield is more than triple the 3.7% average yield of the overall Financials sector. NLY’s current yield is also more than 60% above the 7.36% simple average yield of the Mortgage Investments industry segment, as well as 26% higher than the 9.46% average yield of the segment’s dividend-paying companies.
However, even the above average dividend yield of 12% was unable to overcome the share price drop over the past 12 months. Therefore, the company delivered a total loss of 7% over the past year. However, a share price recovery of less than 9% would bring the total returns back into neutral territory. Any share price advancement above 9% would yield positive total returns. Additional asset appreciation could send total shareholder returns back to levels similar to the company’s 36.5% total return over the past three years and 55.4% total return over the past five years.
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