"I am following your daily advice and have not been steered wrong yet." Thanks to you, et al., for providing a reputable service!"
If you dig around the firm’s old investor presentations, you’ll see that the firm was betting on rates to Of course, they stopped rising and long-term rates soon reversed. Take Annaly Capital Management, Inc. (NYSE:NLY), for instance. "I became a member of The Oxford Club about 3 months ago, and I'm enjoying the knowledge, wisdom, humor, and of course investing advice. "Thanks for all of your help so far. From 2000 through 2012, mortgage rates ticked down, down, down while the stock climbed higher and higher.While Annaly delivered total returns of 609%, its yield bounced between a handsome 10% and a gaudy 15%. Annaly’s quarterly dividend amount has been frozen since 2013 and remains fragile.Given the risky nature of Annaly Capital, even the most risk tolerant investors should only ever consider buying shares when they are trading at a significant discount to their historic norms.For mREITs, this means looking at the Price-to-Book Value ratio (P/BV) and dividend yield, relative to their long-term historical median levels.As you can see, from a P/BV perspective, Annaly’s current valuation is within its historical range.However, the yield is lower than what NLY’s stock has historically offered, which means that investors today don’t seem to be very well compensated for the risk of future dividend cut.Mortgage REITs such as Annaly Capital Management might offer the allure of sky-high dividends, but investors need to realize that these yields are often not safe and can certainly decline in a rising interest rate environment.While a small number of high risk, extremely disciplined investors might be able to profit from this industry, most dividend seekers are likely better off avoiding mREITs.Instead, they can focus on some of the best high dividend stocks for safe income (I am interested in including a REIT, LLP, or MLP similar to Annaly or AMT in my ROTH IRA, Traditional IRA, or SIMPLE IRA. Annaly Capital Management, Inc. (NYSE:NLY) is a mortgage REIT that has had some ups and downs. "Marc, you're my guru when planning for my retirement." "Taking 'class' in Lichtenfeld University! Founded in 1997 in New York City, Annaly Capital Management is the by far the largest and oldest mREIT in America with over $12 billion in assets, which it primarily invests in residential mortgages that are guaranteed by Fannie Mae and Freddie Mac. It appears to be a great long-term strategy; I wish I'd had the information 20 years ago." "You are easy to listen to and you are trusted because your advice works." We have agreed to disagree on that point!
Here are the details.
These companies borrow money short term and lend it long term. "Truthful, tells it like it is, and does not beat around the bush, WONDERFUL." Thank you." Thanks, keep up the good work." As we saw earlier, That volatility is easy to understand when you consider how Annaly’s boom and bust earnings make for chaotic and unsustainable payout ratios at times.The substantial financial leverage used by Annaly to boost its portfolio’s returns adds more risk to the company’s cash flows and dividend, especially given the company’s high payout ratio.Essentially, anyone willing to own Annaly Capital, or almost any mREIT for that matter, can’t depend on secure and stable dividends from these high-risk investments (especially if interest rate rise, in the case of Annaly).Our Dividend Growth Score answers the question, “How fast is the dividend likely to grow?” It considers many of the same fundamental factors as the Safety Score but places more weight on growth-centric metrics like sales and earnings growth and payout ratios. Couldn't have said it any better!!" "Thanks for the great advice over the years. Thanks!!" I took my software profits and started investing in dividend-paying stocks. At the time, I said that until the company proves it can lift net interest income above how much it pays in dividends, it gets a very solid “F” rating. I almost doubled my money." A great teacher who explains things so clearly and with such precision you're never left wondering but understand instantly." This happened when then-Fed chair Alan Greenspan began raising rates in the summer of 2004. Exclusive to Simply Safe Dividends, Dividend Safety Scores were created by our founder, Brian Bollinger, who is a CPA and former partner at a multi-billion dollar investment firm. Roper Technologies (ROP) However, it’s vitally important for dividend investors to realize that this industry is one of the hardest to consistently profit from, for numerous reasons.Let’s take a closer look at Annaly Capital, one of the most popular mREITs, to see if this high dividend stock should be considered by those who Founded in 1997 in New York City, Annaly Capital Management is the by far the largest and oldest mREIT in America with over $12 billion in assets, which it primarily invests in residential mortgages that are guaranteed by Fannie Mae and Freddie Mac.Like all mREITs, Annaly’s business model involves borrowing at short-term (lower) interest rates, in order to fund the purchase of longer-term higher-yielding assets, mostly residential and commercial mortgage-backed securities (MBS).The difference between these rates is the net interest margin, or “spread,” which Annaly pockets.Combined with a high amount of leverage (6.4:1 as of the end of 2016), this strategy creates around a 10% levered return that generates the company’s profits.However, while Annaly’s high yield of 10.6% might initially seem appealing, investors need to remember that in this age of record low interest rates, such generous yields don’t come without a large amount of risk in most cases.In fact, the risks facing Annaly are significant enough that most conservative dividend investors are likely better off steering clear of the industry entirely.As you can see, Annaly’s financial results are very volatile. Is its current 11.7% yield safe?
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