Annaly Capital: A Buy In Spite Of The Naysayers

Jan.11.12 | About: Annaly Capital (NLY)

Here we go again. The naysaying doom-and-gloom crowd would have us think that the days of mREIT dividend returns are coming to a halt, that Annaly Capital (NYSE:NLY) is no longer an attractive stock to own and the risks outweigh the rewards.

It is a refrain we have heard before, especially after the tiny dividend cut that NLY had (the 2nd cut in a row). The price has dipped, and the naysayers are jumping on the "dump" side as usual.

But let's get real for a minute or two. NLY is a bargain, in my opinion, and the dividend yield is intact and difficult to resist, which is why we would want to own it anyway.

Basic Fundamentals

  • Price: $16.28/share
  • Dividend Yield: 14.20%
  • ESS Rating: Neutral

The share price is down roughly 5% of late, but there always is a drop-off in price after the ex-dividend date, and a run up in price just prior to the ex-dividend date, which makes it a favorite for traders during that time period.

The reason income-seekers and retirees own shares (well, my reason anyway) is for the consistency of its dividend. Yes, it has fluctuated through the ups and downs of the market forces and the headwinds it has faced the last two years, as I have outlined specifically in this previous article.

There are reports out that state that NLY is facing a "pivotal year" in 2012 (such as this one) which I contend is just more of the same as we see every year with all REITs - not just NLY. Since NLY is the big dog in the mREIT sector, of course it faces the most challenges.

In my opinion, given that the Fed has given an "all clear" with keeping interest rates very low for at least 2 years (and in my opinion, longer) as well as the puny results that the government has had in its continual efforts to have massive refinancing for those underwater mortgages, I feel that now is the time to add NLY to your retirement portfolio, or even add to your position if you already own it!

My take on yesterday's 4th quarter market commentary by NLY, (read the report here) is that 2012 will be much like 2011, and we can anticipate business as usual thus far, barring unforeseen events, and that the dividends are safely intact. I think I am correct in my assessment.

As such, the 14.2% dividend is hard to pass up, even if the stock dips in price a bit more. The PPS is still below the BV and the company has not issued another stock offering either, which also could bode well for my opinion.

My Opinion

NLY has been a mainstay of my retirement strategy portfolio for quite some time. The stock has navigated through some difficult times and has come out through the other side with just a few bumps and bruises.

In a well diversified, balanced portfolio, NLY offers a wonderful dividend, a conservative management approach, and an unequaled track record. In this sector, NLY is the stock to deploy a reasonable percentage of investable funds, for a steady and relatively secure stream of income. It could be for your portfolio as well.

Disclosure: I am long NLY.

Disclaimer: Please remember to do your own research, and that this article is the opinion of its author and not a recommendation to buy or sell any security.