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If you invested $10k in Annaly’s capital management 5 years ago, this is how much you would have earned in dividends today


Income investors are always on the lookout for stocks that will generate high returns, but many of these stocks don’t perform well over the long term. Ironically, one of the most popular mortgage real estate investment trusts (mREITs) among income investors is a lagging stock market despite its reputation for being a high-performing stock. high income. Let’s take a closer look.

Annaly Capital Management Inc. (NYSE: NLY) is an mREIT that invests in mortgage-backed securities (MBS) to lend money to residential properties backed by Fannie Mae, Freddie Mac or Ginnie Mae. It is one of the best followed MREITs by investors today.

Annaly Capital Management has long been known as a volatile stock with a high beta of 1.35 (1.00 on par with the general market) but has always paid income investors a large dividend offset for that change. And while Annaly Capital Management has a long history of paying double-digit dividends, it has, unfortunately, also cut that dividend several times in the past five years. The quarterly dividend that paid $1.20 in November 2017 is now just $0.88.

If you invested $10,000 in Annaly Capital Management 5 years ago, you would have received 222.41 shares at a split adjusted price of $44.96. Over the past five years, you would have collected $20.00 in dividends, or $4,448, up 44.4%. Today, the $3.52 annual dividend yields 18.41%.

But the problem is that Annaly Capital Management’s stock price has fallen dramatically over the past 5 years and its most recent price was $19.12. Thus, your total return for 5 years will be -12.99% or -2.74% per year. Even with dividends received, you will only have $8,703 of your initial $10,000 investment. So, paid dividends are only useful if you are a pure income investor and do not plan to sell the stock and intend to collect the dividend only in the short term.

If you had reinvested your dividends instead of getting cash, you would have done even worse. Your original 222.42 shares will now grow to 406.19 shares, but your total return will be -22.34%, or an average loss of 4.93% per year. Your 406.19 shares will now be worth $7,766. So this is one of those stocks that it may not pay for dividend reinvestment.

On September 26, Annaly Capital Management initiated a 1-for-4 inversion stock split to boost its price, which has fallen below $6, but the price is still down about 5% since. Investors are often wary of companies starting a reverse stock split.

Annaly recently reported her Q3 operating expenses. Non-GAAP earnings per share (EPS) of $1.06 beat a street estimate of $0.07. That’s a positive and has since boosted the stock price by about 15%.

The $4.19 Annual Funds from Operations (FFO) still include $3.52 in dividends, but the payout ratio is high at 84%. There’s not much margin of safety there.

The bottom line is that for pure income investors who don’t care about price fluctuations but just need high income, Annaly Capital Management could be a worthwhile investment at current levels. But for investors looking for capital appreciation along with dividends, Annaly Capital Management may not be the ideal choice.

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