As followers of Annaly Capital (NYSE:NLY) are fully aware, the earnings were missed, a few downgrades have popped up and the focus has turned to the dividend. I am not sure when NLY will announce the next dividend, but generally, it is not long after the announcement of its preferred dividend payout which it did Monday. The next ex-dividend for NLY should be towards the latter part of March, with payment about a month later. When NLY announces has been a topic of chatter, as well what the dividend will actually be.
A Brief Review
Annaly Capital : Price: $16.50/share, Dividend Yield: 13.85%, ESS Rating: Neutral
A few things that interest me are that the PPS holding up after the earnings report, and the health of Mike Farrell not causing a rush to the sidelines from either individual investors or institutions. As a matter of fact, the insider buys have been 185,000 shares, with no shares sold as of this date. It is hard for me to imagine that NLY wouldn't cut its dividend, considering that most of the equations in figuring the amount out is computed using IRS guidelines, I imagine. They are required to pay at least 90% of net income to shareholders to maintain the REIT status.
That being said, we have seen pre-payments rise and the yield curve flatten, and in the company conference call, those issues were duly noted, as well as the zero interest rate policy of the Fed through 2014. The call gave no hint of the direction of dividends, however, and we as income investors are curious to know where they will be. I suppose it comes down to the reading of "tea leaves" and also realizing that NLY can tweak the yield a bit by going over the minimum 90% rule set by the IRS.
Where Does All Of This Leave Investors?
On a personal note, since I have owned NLY for quite some time, I am fine with half the yield, if need be. Of course, I would not be happy about it, but it will not be a foretelling of NLY falling off of a cliff within its business model. Yes, other mREITs have certainly outperformed NLY, but they took on more leverage and more risk, while NLY took what the business landscape gave on a more conservative track.
If I were to venture a guess, I would say that anything upwards of $.45/share would be a happy moment, and anything under $.35/share would be a disappointment. It can happen, and I will still not sell my shares, and if the PPS drops significantly, I will add some more.
Well, just to add a bit more to what I have already stated, my opinion is that we will be more happy than disappointed. Since I have no crystal ball that works right now, I am going to side with Jim Cramer for the time being when he says, "NLY will be able to maintain their dividend," whatever that might mean.
Disclosure: I am long (NLY).
Disclaimer: Please do your own research and do not buy or sell any security based on opinions expressed here. Your personal investment needs and goals, as well as risk tolerance should always be evaluated beforehand.