Is Annaly Capital's 13% Dividend Safe Through a Full Rate Cycle?
Annaly Capital raised its dividend in June, but investors need to put that increase into its historical context.
Overview
The big draw for most investors with Annaly Capital (NYSE: NLY) is its massive 13.7% dividend yield. To put that yield into context, the S&P 500 index (SNPINDEX: ^GSPC) has a yield of just about 1%, and the average real estate investment trust (REIT) yields 3.6%. If you are trying to maximize the income your portfolio generates, it would be hard to say no to Annaly Capital's yield, but here's why you might want to anyway.
Annaly Capital is a mortgage REIT. It issues stock and debt, using the proceeds to buy mortgages pooled into bond-like securities. It also manages the collection of loan payments, known as mortgage servicing rights. While mortgage servicing tends to provide a reliable income stream, owning mortgages is a more volatile business.
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Originally published at www.fool.com.