Well, here is an idea from a forum member, let’s look into this one. For starters, a 14% dividend yield.. It seems our forum member might be onto something
How about this for a quarterly dividend pay-out:
What do they do?
- Well, they’re registered (or at least taxed) as a REIT, a real estate investment trust, which has some advantages: As a REIT, the company would not be subject to federal corporate income tax, provided it distributes at least 90% of its taxable income to its stockholders.
- The company invests primarily in mortgage pass-through certificates, collateralized mortgage obligations, agency callable debentures, and other mortgage-backed securities representing interests in or obligations backed by pools of mortgage loans. Annaly Capital also invests in Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, and Federal National Mortgage Association debentures
Hmm. Difficult to kick the tires of this, for the non-specialist, especially one who just wrote about information asymmetries in financial markets.
They seem to finance themselves with short-term notes, putting these to work in these financial instruments
How are they doing?
Well, if you’re able to pay a whopping dividend, they’re probably doing something right. Or alternatively, the yield is so high because some feel they might not be. The three year chart suggests the former is more likely than the latter though:
The top officials earning $23.6M, that’s pretty hefty, on first sight, but we don’t know how much of that is option based. A good year can do wonders here.
The earnings are good but flat ($2.33 last year, $2.41 this year, $2.29 next, expected). It seems pretty seasonal, although the variety comes from operating expenses (being curiously negative in Q4 2010).
No insider sales, mostly option exercise. A curious buy at $26.29.
The share count is raising rather steeply, from 662M in Q4 2010 to 948M at the end of Q3 2011.
We’re not going to pretend that we understand the mortgage backed securities stuff they’re investing in, so there is little we can add to this first attempt at ‘analysis.’ Perhaps others want to have a go here, this is just a first look.
However, technically it is somewhat interesting.
- We’re just broken out of the 200 day moving average, but that doesn’t seem important in the past
- It’s very nearly oversold and at the top of the recent trading range. That suggests they might be in for a breather.
So, on first sight it’s a very nice dividend earner, as long as you have faith and don’t ask too many difficult questions how they perform this magic. They’ve been doing it for quite some time, and in difficult circumstances, so they do have a track record.