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Annaly Capital Management 1 Of 3 Interesting REITs With High Yields

May 21 2012, 17:02 by: Tactical Investor  |  about: NLY, includes: CIM, DX

Investing in dividend paying stocks makes sense for the following reasons:

  1. A steady income without having to sell your position
  2. It's a good hedge against inflation
  3. Cash flow regardless of market direction
  4. Quicker compounding
  5. Provides one with the two potential sources of income, one from capital gains and the other from the dividends paid out
  6. You can also open up additional streams of income by selling covered calls and or puts if you are bullish on the stock

Some reasons to like Annaly Capital Management (NLY):

  • An excellent yield of 13.62%
  • A strong quarterly revenue growth of 29.1%
  • A good quarterly earnings growth rate of 28.8%
  • A decent relative strength score of 56
  • A five year cash flow per share average of $2.07
  • Operating margins of 70%
  • Profit margins of 63%
  • A low beta of 0.23 indicates that this is not a very volatile stock
  • A strong five-year dividend growth rate of 15.62%
  • Annual EPS before NRI has increased from $1.57 in 2007 to $2.57 in 2011
  • $100K invested for 10 years would have grown to $171K. If the dividends were reinvested the rate of return would be far higher.

Company: Annaly Capital Management

Basic Key ratios

  1. Percentage Held by Insiders = 1
  2. Relative Strength 52 weeks = 56
  3. Dividend 5-year Growth = 15.62
  4. Cash Flow 5-year Average = 2.07
  5. Dividend Yield 5-Year Average = 13.12

Growth

  1. Net Income ($mil) 12/2011 = 344
  2. Net Income ($mil) 12/2010 = 1267
  3. Net Income ($mil) 12/2009 = 1961
  4. Net Income Reported Quarterly ($mil) = 902
  1. EBITDA ($mil) 12/2011 = 1691
  2. EBITDA ($mil) 12/2010 = 2400
  3. EBITDA ($mil) 12/2009 = 2828
  4. Cash Flow ($/share) 12/2011 = 3.17
  5. Cash Flow ($/share) 12/2010 = 3.39
  6. Cash Flow ($/share) 12/2009 = 3.25
  1. Sales ($mil) 12/2011 = 1120
  2. Sales ($mil) 12/2010 = 2635
  3. Sales ($mil) 12/2009 = 3424
  1. Annual EPS before NRI 12/2007 = 1.27
  2. Annual EPS before NRI 12/2008 = 2.2
  3. Annual EPS before NRI 12/2009 = 2.76
  4. Annual EPS before NRI 12/2010 = 2.31
  5. Annual EPS before NRI 12/2011 = 2.57

Dividend history

  1. Dividend Yield = 13.62
  2. Dividend Yield 5 Year Average 12/2011 = 13.12
  3. Annual Dividend 12/2011 = 2.44
  4. Dividend 5 year Growth 12/2011 = 15.62

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.92
  2. Payout Ratio 5 Year Average 12/2011 = 1.03

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 2
  2. 5 Year History EPS Growth 12/2011 = 19.19
  3. ROE 5 Year Average 12/2011 = 15.03
  4. Return on Investment 12/2011 = 13.72
  5. Current Ratio 12/2011 = 0.05
  6. Current Ratio 5 Year Average = 0.04
  7. Quick Ratio = 0.04
  8. Cash Ratio = 0.02
  9. Interest Coverage Quarterly = 7.89

Valuation

  1. Book Value Quarterly = 16.25
  2. Price/ Book = 0.99
  3. Price/ Cash Flow = 5.1

Company: Dynex Capital Inc (DX)

Growth

  1. Net Income ($mil) 12/2011 = 40
  2. Net Income ($mil) 12/2010 = 29
  3. Net Income ($mil) 12/2009 = 18
  1. EBITDA ($mil) 12/2011 = 72
  2. EBITDA ($mil) 12/2010 = 36
  3. EBITDA ($mil) 12/2009 = 20
  4. Cash Flow ($/share) 12/2011 = 1.79
  5. Cash Flow ($/share) 12/2010 = 1.21
  6. Cash Flow ($/share) 12/2009 = 1.48
  1. Sales ($mil) 12/2011 = 83
  2. Sales ($mil) 12/2010 = 49
  3. Sales ($mil) 12/2009 = 37
  1. Annual EPS before NRI 12/2007 = 0.4
  2. Annual EPS before NRI 12/2008 = 0.91
  3. Annual EPS before NRI 12/2009 = 1.02
  4. Annual EPS before NRI 12/2010 = 1.41
  5. Annual EPS before NRI 12/2011 = 1.03

Dividend history

  1. Dividend Yield = 12.46
  2. Dividend Yield 5 Year Average 12/2011 = 8.5
  3. Dividend 5 year Growth 12/2011 = 38.03

Performance

  1. ROE 5 Year Average 12/2011 = 13.07
  2. Return on Investment 06/2011 = 1.59
  3. Current Ratio 06/2011 = 13.07
  4. Current Ratio 5 Year Average = 72.6
  5. Quick Ratio = 13.07
  6. Cash Ratio = 3.7
  7. Interest Coverage = 2.7

Company: Chimera Invest (CIM)

Basic Key ratios

  1. Percentage Held by Insiders = 0.19
  2. Relative Strength 52 weeks = 35
  3. Dividend 5-year Growth = 26.72
  4. Cash Flow 5-year Average = -0.11
  5. Dividend Yield 5-Year Average = 12.68

Growth

  1. Net Income ($mil) 12/2011 = N/A
  2. Net Income ($mil) 12/2010 = 533
  3. Net Income ($mil) 12/2009 = 324
  1. EBITDA ($mil) 12/2011 = N/A
  2. EBITDA ($mil) 12/2010 = 286
  3. EBITDA ($mil) 12/2009 = 275
  1. Cash Flow ($/share) 12/2011 = N/A
  2. Cash Flow ($/share) 12/2010 = 0.3
  3. Cash Flow ($/share) 12/2009 = 0.41
  1. Sales ($mil) 12/2011 = N/A
  2. Sales ($mil) 12/2010 = 583
  3. Sales ($mil) 12/2009 = 299

Dividend history

  1. Dividend Yield = 16.18
  2. Dividend Yield 5 Year Average 12/2011 = 12.68
  3. Annual Dividend 12/2011 = 0.51
  4. Dividend 5 year Growth 12/2011 = 26.72

Dividend sustainability

  1. Payout Ratio 09/2011 = 116
  2. Payout Ratio 5 Year Average 12/2011 = 0.99

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 8.5
  2. ROE 5 Year Average 12/2011 = 14.57
  3. Current Ratio 5 Year Average = 0.22
  4. Quick Ratio = 0.03
  5. Cash Ratio = 0
  6. Interest Coverage = 4.40

Valuation

  1. Book Value Quarterly = 3.27
  2. Price/ Book = 0.83
  3. Price/ Cash Flow = 9.19

Notes

This is a higher risk play and only investors willing to take on some risk should consider this play.

Important facts investors should be aware of in regard to investing and REITs:

  1. Payout ratios are not that important when it comes to REITs as they are required by law to pay a majority of their cash flow as dividends. Payout ratios are calculated by dividing the dividend rate by the net income per share, and this is why the payout ratio for REITs is often higher than 100%. The more important ratio to focus on is the cash flow per share. If one focuses on the cash flow, one will see that in most cases, it exceeds the dividend declared per share.

Conclusion

The markets should remain in a corrective mode, for the most part, of the second quarter. Long-term investors can use strong pullbacks to slowly start deploying money into long-term investments. Investors looking for other investment ideas might find these articles to be of interest: General Electric: An Option Strategy That Could Potentially triple your yield and Alcatel-Lucent: Time To Buy Or Flee?

Disclaimer

This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies - let the buyer beware.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: EPS and Price Vs industry charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com.

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