Updated: Sep 28, 2022
Annaly Capital Management, Inc. (NYSE: NLY)
Annaly Capital Management is one of the largest mortgage real estate investment trusts. It is organized in Maryland with its principal office in New York City. The company borrows money, primarily via short-term repurchase agreements, and reinvests the proceeds in asset-backed securities. Today, it has over $82.3 billion in assets as the largest mortgage REIT in the industry. Most recently, Standard & Poor has selected mortgage investment company Annaly Capital Management to join its MidCap 400 index and the company has seen an increase in mentions by 177% over the last day, prompting investors to wonder what makes the company so hype. Currently, shares of Annaly Capital Management trade at $26.62.
Annaly Capital Management is a company with solid foundations as a REIT and has lots of reasons that may generate positive hype. Here are some of them.
Annaly's nearly 13.8% dividend yield is the highest on this list, and the company has been averaging a roughly 10% yield over the past two decades.
$74.9 billion of Annaly's $82.3 billion in total assets are agency securities, and with the steeping of the yield curve, Annaly stands to gain via their bottom line.
Although higher interest rates are increasing short-term borrowing costs, they'll also boost the yields on the MBSs Annaly is purchasing.
Over time, as the interest rate yield curve steepens in response to disproportionately longer periods of economic expansion, Annaly's net interest margin should climb.
Annaly also has a rapidly growing revenue stream derived from servicing mortgages.
Mortgage servicing rights typically pay Annaly 0.25% of the total mortgage balance each year, and given higher interest rates, mortgage balances go up subsequently raising the fees Annaly receives.
Not all investments are all good, and it is incredibly important to consider the bad news and downsides to making an investment before you take a position. Here is one of the drawbacks causing Annaly Capital Management to gain negative hype too.
The real issue with Annaly shares is valuation. The stock trades today at a higher premium to its book value than at any point in the last 10 years.
The most impressive aspect of Annaly Capital Management at this moment is its dividend yield however, mREITs are highly susceptible to changes in the marketplace, today's volatile market is a challenging environment to navigate and could affect yields as well. Despite this, Annaly has a good standing as the largest in the industry and is a stock to put on your radar.
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