Seeking Alpha

The only question raised by Annaly's (NLY) repurchase plan is "what took the board so long?"...

The only question raised by Annaly's (NLY) repurchase plan is "what took the board so long?" With shares trading below book value and $100B+ of MBS on its books (much of it trading above par), the company just sold high-priced assets, cut its prepayment exposure by $1.5B, and used the funds to pick up cheap shares.
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Comments (15)
  • markwax
    , contributor
    Comments (3) | Send Message
     
    I picked up several blocks in the 15.50 range over the past 48 hours,.... anytime NLY has trade below book in the last decade you could not could not miss. The dividend has always been north of 10%, no matter the leverage required.
    16 Oct 2012, 04:40 PM Reply Like
  • batitude
    , contributor
    Comments (118) | Send Message
     
    A good move by NLY at this point, but in the past buying back shares and then having to do a stock offering to grow did not make much sense. Now, they can do the buyback, support the share price, and support the Dividend % - then do a stock offering when the interest rate curve is favorable again. Some other mReits will not be able to do this - they are too leveraged already.
    16 Oct 2012, 04:46 PM Reply Like
  • MRFINANCE
    , contributor
    Comments (25) | Send Message
     
    It only makes sense to do a buy back if they have no need for future funding - and no intention to do another stock offering. NLY is selling slightly above book value, but its the P/E ratio scares the hell out of me.
    16 Oct 2012, 04:50 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2811) | Send Message
     
    According to the quarterly report, they had a June 30 book value of $16.23, which should have risen, given the Fed's buying. So they are trading a slight discount to book is I think what you meant.
    16 Oct 2012, 05:13 PM Reply Like
  • batitude
    , contributor
    Comments (118) | Send Message
     
    P/E Ratio is almost meaningless for REITs - Book Value is the most important, and the Dividend % summarizes the other "most meaningful" metrics - the dividend has to be >90% of the TAXABLE income, so GAAP numbers are really not very meaningful (hard for a CPA to say!), and if the stock price gets too high (above book value) the Dividend % is lower and doesn't make the stock attractive for a dividend buyer. NLY is the blue chip of mREITs, but possibly the only one that will be able to do a share repurchase - mostly due to its' size, but also due to the conservative leverage.
    16 Oct 2012, 05:15 PM Reply Like
  • MRFINANCE
    , contributor
    Comments (25) | Send Message
     
    Don't dismiss the P/E ratio. Earnings always drive dividends and therefore, is a predictor of future dividends. As a CPA, you know that the difference between GAAP income and taxable income is mostly "timing". Over the long run, the timing issues disappear and GAAP and tax income come into alignment. I won't pay 50 X earnings for any stock.
    17 Oct 2012, 09:18 AM Reply Like
  • AxiosCap
    , contributor
    Comments (301) | Send Message
     
    Tells me the Fed is crowding them out. Farrell raised a ton of capital this year and now they can't use it, so he's "giving it back". Great response from the stock. I've owned it for over a decade now and have no intention of selling it shy of the world coming to an end.
    16 Oct 2012, 04:54 PM Reply Like
  • ScooterSC
    , contributor
    Comments (33) | Send Message
     
    What took so long? Everyone can't be perfectionists. How many shares did you buy at its nadir?
    16 Oct 2012, 04:54 PM Reply Like
  • natealmond
    , contributor
    Comments (8) | Send Message
     
    What is the actual book value of a share of Annaly?
    16 Oct 2012, 05:38 PM Reply Like
  • silvermarv
    , contributor
    Comment (1) | Send Message
     
    How do you buy and participate in the repurchase program??
    16 Oct 2012, 06:20 PM Reply Like
  • fredknox1
    , contributor
    Comments (2) | Send Message
     
    When both the Board and Mike Farrell buy shares, it is time to get in also. There are too many negative articles on NLY right now. They may be spot on for a point or two, but that is a buying opportunity. Management is one of the best in the mReit business
    16 Oct 2012, 09:41 PM Reply Like
  • fredknox1
    , contributor
    Comments (2) | Send Message
     
    I am an investor who spends a lot of time reading articles on yield and yield stocks. They usually are not "home runs" but they have boosted my returns in a low yield market as I am near retirement.
    16 Oct 2012, 09:42 PM Reply Like
  • chetmast31
    , contributor
    Comments (2) | Send Message
     
    I'm happy to see all of the favorable comments.I intend to keep my shares and the great dividends.
    16 Oct 2012, 09:47 PM Reply Like
  • brown8467
    , contributor
    Comments (2) | Send Message
     
    I'm voting for Romney. This QE3 is nuts! The US dollar will be worthless and we will be stuck with a debt and high interest rates!
    16 Oct 2012, 10:10 PM Reply Like
  • userzweig
    , contributor
    Comments (3) | Send Message
     
    It is interesting that NLY's management would do this when their compensation is tied to the firm's book value; this looks like it will decrease the book value by about 9% from its current $15.824 billion ($16.23 book value per share x 975 million shares, according to Yahoo Finance).

     

    According to a 'Fool'-ish article, the NLY management bonuses are tied to total book value, so this would reduce their bonuses by 10%, unless they changed the bonus structure. That would be kind of nice of them, but maybe they realize that it's the best long term strategy.

     

    In my opinion, they figured out that the Fed seems willing to drive MBS prices up and pay the inflated prices every month, so why not just take the money and give the profits to the shareholders.
    16 Oct 2012, 10:17 PM Reply Like
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