"We expect book value to fall as rates rise and MBS spreads to widen post Fed tapering," says analyst Eric Beardsley, giving NLY a $9.50 price target. With management taking actions to protect said book value such as moving into short-duration assets and boosting hedges, expect more earnings headwinds and dividend cuts of about 40%. An expected dividend of $0.80 per share is an 8% yield based on the current stock price. Total return of 2% over the next year compares to 10% Beardsley expects for the overall mREIT sector (REM).
It's the same story for AGNC which gets an $18.50 price target. Beardsley expects book value to fall 15% to $21.39 by Q4 next year and the dividend to drop to $2 - a 10% yield based on the current stock price. He sees total return of 4% over the next year, again compared to 10% for the overall sector.