I promised myself I would not write an article about Annaly Capital (NLY) for at least a few weeks. I suppose I am addicted to this stock and all that has been happening, so forgive me while I write a very brief, but poignant update about one of our favorites.
So What's New?
Rather than rehash the same old "stuff" let's just take a look at some recent developments, and formulate an opinion.
- 3 major insiders decided to exercise their options to actually take the shares of Annaly rather than the usual route of cashing out
- Annaly beat earnings estimates for the quarter
- It has remained conservative in their business model, opting for a less bumpy road potentially, when interest rates eventually ride
- It has de-levered deftly without disrupting the current dividend and it appears that the dividend will be just about the same give or take a few cents (I am hoping for the giving not taking)
- We also have had some impressive capital appreciation recently
One month ago, on April 10, the share price closed at $15.63. Since then we have been paid our $.55/share dividend, and as of today (5/10/2012) the share price stands at $16.69.
That translates into a total return in one month including the dividend, of $1.61/share, or over 9%, in ONE MONTH!
By contrast, the S&P 500 (SPY) has been almost exactly FLAT at 1358. A zero return for the index over the same one-month period.
To be sure, I do not expect that we will come close to these returns on any sort of regular basis however sweet that might be. We still face the same headwinds as I have gone over and over in all of my articles about Annaly. That being said, it does seem that Wall Street likes the current developments as noted in this article, which details the new preferred share offering of Class C shares, with a 7.625% yield, at a $25.00 par price per share:
"Annaly expects to use the proceeds of this offering to purchase mortgage-backed securities for its investment portfolio and for general corporate purposes, which may include the retirement of its long-term indebtedness, additional investments and repayment of short term indebtedness."
I realize that the statement above is always used but it is a good reminder that the nearly $280 million raised by virtue of this new offering will be put to good use without diluting common shares, nor the book value, and at 1/2 the dividend yield of the common shares should not cannibalize them at all.
Actually it opens up even more of a market for conservative investors as well as mutual funds. I love this move, and as evidenced by the share price, so does Wall Street.
Annaly still faces the same issues as I have outlined in all of my articles including one of my personal favorites that I hope you take a moment to refer back to.
I firmly believe that Annaly offers a rather conservative "risk" opportunity that could enhance any dividend income portfolio, and as a long-time holder of the shares, I am confident in the near- to mid-term returns.
Disclosure: I am long NLY.