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Alberto Abaterusso
Alberto Abaterusso
Articles (2616) 

Have a Look at Annaly Capital Management

The stock has a dividend yield of 11.5%

August 13, 2018 | About:

I was screening for U.S. publicly traded securities that are characterized by a high dividend yield, and I encountered the stock Annaly Capital Management Inc. (NYSE:NLY).

Annaly Capital Management is traded on the New York Stock Exchange and is distributing a cash quarterly dividend of 30 cents to its shareholders for a forward annual dividend of $1.20 per ordinary share, granting 11.5%. That is 970 basis points higher than the 1.8% current dividend yield of the S&P 500 index. The company is gifting its shareholders a very interesting dividend yield for something like 20 years already.

Annaly Capital Management is trading at $10.42 per share and has a market capitalization of $12.16 billion. The stock has a price-earnings ratio of 4.05 versus an industry median of 15.29 times and a price-sales ratio ratio of 3.63 versus an industry median of 7.16 times.

A price-book ratio of 1.01 is also an indication that Annaly Capital Management is trading at compelling prices. According to the technical indicators of GuruFocus, Annaly Capital Management is trading underneath the 200 and the 50-SMA lines. The stock has fallen 15% for the 52-weeks through Aug. 10. The current share price is almost on par with the value of the 100-SMA lines. The 52-weeks range is $9.95 to $12.58 per share.

Annaly Capital Management is a leader in the real estate investment trust. The company invests in residential and commercial assets. Annaly Capital Management is also active in financing all the activities related to the aforementioned assets.

The primary goals the company sets for its stakeholders are value accretion and the distribution of wealth through the payment of recurring dividends. To accomplish this, Annaly Capital Management proceeds with management of investments that are carefully selected.

According to the company’s website, Annaly Capital Management has assets of nearly $102 billion. The portfolio of the company consists of securities, equity and loans in the residential and commercial markets.

Annaly Capital Management is guided by Annaly Management Company LLC.

Annaly Management Company LLC manages the overall business strategy of the REIT company and supervises every kind of investment decision that concerns the portfolio of Annaly.

Annaly Management Company LLC also exercises control over the services processes and solutions of Annaly Capital Management.

The company is fiscally treated as a real estate investment trust for federal income tax purposes.

Some figures about Annaly Capital Management tell that the size of the mortgage REIT is 23 times the industry median by market cap. The equity of Annaly is allocated for 28% across Residential Credit, Commercial Real Estate and Middle Market Lending, and for 72% across agencies.

At the end of 2013, Anally Capital Management started diversifying its portfolio of activities and since then the company has returned to its shareholders a total yield of 77%. The REIT company has access to 37 options that expose its investments to both fixed and floating rates.

Annaly Capital Management is going to acquire MTGE Investment Corp. for $900 million. The acquisition was announced by the company on May 2, and the process is still pending. Kevin Keyes, the chairman, CEO and president of Annaly Capital Management, said with the second quarter earnings report that the acquisition will be scale and diversification augmentative for the investment platform of the REIT company. Following the deal, Annaly expects an increase in earnings, to make cost savings and to sustain the ongoing growth. Annaly Capital Management thinks that this transaction is an important milestone in the history of the company as it will consolidateAnnaly as a leader in the REIT – diversified industry.

The company closed a robust second quarter in 2018. Amid the most important figures, it reported core earnings of 30 cents per share, beating consensus by 1 cent. That was backed on interest income of $776.81 million, which was a 44.5% increase year-over-year.

However, the company missed consensus on interest income by $14.69 million. The net interest margin grew 4 basis points to 1.56% in the second quarter from 1.52% in the previous quarter. Annaly also reported an increase in the hedge fund ratio by 100 basis points to 95% from a first quarter ratio of 94%. The book value slightly decreased to $10.35 per share in the second quarter from $10.53 per share in the first quarter of 2018. The net interest spread grew 9 basis points to 1.18%.


Annaly Capital Management has a forward price-earnings ratio of 9.06, which when multiplied by earnings per share of $1.18 for full fiscal 2018, yields a value of $10.70 per share.

According to Peter Lynch, the current share price of $10.40 is below the Peter Lynch Earnings Line (P/E = 15) of $38.5 and the Price at Med P/E without NRI (P/E = 8.52) of $21.9 per share.

The stock is reporting about 1.17 billion shares outstanding, of which 54.54% is held by institutions and 0.39% is held by insiders. The float is 99.08%.

Some forecasts about the stock indicate that earnings per share of $1.18 will be backed on interest income of $3.25 billion for full fiscal 2018. Net earnings are expected to drop 2.5% from 2018 to 2019. Net earnings will decrease by an annual average 1.2% over the following five fiscal-year period.

The average target price is $10.40 per share. That is a mean of 5 estimates ranging between a low of $10 and a high of $11 per share.

The recommendation rating is 3 out of a total of 5.

Disclosure: I have no positions in any security mentioned in this article.

About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about how to pick potential value stocks. Gold, silver and precious metals mining industries is also my cup of tea. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master\\\'s Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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