High Dividend Yield Isn't Looking So Good From Annaly Capital Preferred
Jacobs Stock Photography Ltd/DigitalVision via Getty Images Jacobs Stock Photography Ltd/DigitalVision via Getty Images Many people like the company Annaly Capital Management (NLY) as a mortgage REIT but may not want to take on all the risk from the common stock.
We’ve spent a great deal of time trading in the preferred shares from mREIT (mortgage REIT) companies, and the preferred shares carry materially less risk than the common stock.
Of all the preferred shares we cover in the sector, we believe the NLY preferred shares carry the least amount of risk.
I would give DX-C (DX.PR.C) the same rating (or even slightly better) based on fundamentals, but NLY is much larger.
So investors should expect the NLY and Dynex Capital (DX) preferred shares to be among the least volatile in the sector.
NLY-G has routinely been out of our buy range, and as of now it is well out of our buy range: The shares only have a yield of 8.22% and a negative yield to call.
The only impressive thing about the yield to call is that shares are valued so highly.
I didn’t think we would see a negative yield to call on these shares and I believe it should be pretty rare.
Okay, there was a decent change that it might happen at some point.
But I would’ve expected that to be more of a very short-term liquidity event.
Not an event that lasted long enough for me to write a public article on Seeking Alpha about it.
If short-term rates fell, that would allow the dividend rate to drop even more in percentage terms.
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