I think the better question might be, "why SHOULDN'T Annaly Capital Management (NLY) be part of ANY core holding portfolio, especially for retirement?"
There have been plenty of articles written on mREITS recently, and I would venture a guess that everyone knows the headwinds that they face these days. Here's an indepth overview.
Between "Operation Twist", the FED buying MBSs, and the SEC "conveniently" looking at the tax status of REITs, (timing was such that it raised both of my eyebrows by the way), I absolutely understand the reluctance of an investor to hang on to shares of American Capital Agency (AGNC), or Chimera (CIM) or Annaly (NLY). I continue to suggest to active investors, who pay attention to what is happening in the REIT world, that holding on to any of these stocks is an extremely strong way to enhance an entire portfolio. Mainly because of the dividends they offer, EVEN if they happened to be cut to some degree by:
- The "new" refinance push by the government recently (HARP)
- A flatter yield curve making it more challenging for REITs to profit
I maintain that these investments in either a core portfolio holding, or an IRA for retirement holding, when part of a diversified assortment of stocks, will give you better than average returns along with retirement income more efficiently than a vast majority of other holdings available.
As stated, risks are inherent here, and somewhat elevated right now, but It is my opinion that NLY will be able to navigate through just about everything. CEO Mike Farrell has faced tough times before, and the entire management team has proven itself over and over to be "up" for the challenges.
Keep in mind that Annaly takes a more conservative approach than the others I mentioned, which for my taste is a positive.
Some Recent NLY Fundamentals
- As of 11/08/2011, the PPS was $16.54 with a dividend yield of 14.7%, or $2.40/per share.
- The company's 10Q, released Tuesday,looks very good (net income decrease related to interest rate swaps). I urge everyone to read it.
- The company's 6 month chart has been relatively stable and the share price has been in an uptrend since early October as well, even in the face of all the so-called issues swirling around.
What all of this says to me is that my opinion is in line with the buyers of NLY shares as of now. Otherwise, we probably would have seen a great deterioration in the share price. Instead, we have seen more stability. Stability is what I personally like when I own a stock for its dividends and not for major capital appreciation.
NLY remains a buy in my opinion, at these levels, even if the dividend is cut by 30% or so (even more in my opinion, after all, is a 9% or 10% yield hard to take??) and that scenario is not a given anyway. Having Annaly in a retirement portfolio for the longer term will give your dividend cash flow a major jolt, and it is the best mREIT out there as far as I'm concerned.
Is it right for you? Depending on your portfolio and risk tolerance, it might very well be just what the doctor ordered.
Disclosure: I am long NLY.