Boston, MA 10/07/2013 (wallstreetpr) – Annaly Capital Management, Inc. (NYSE:NLY) was a good buy in a depressed market scenario. It offered stable earnings in the form of regular dividends. Investors turned to it with relief. The investments were lucrative for several new investors who had turned to the stock market in the hope of accumulating wealth in an economic environment where their traditional income sources had taken a hit. The strategy paid off.
NLY is a Real Estate Investment Trust (REIT) that holds and administers a portfolio of real estate products, such as mortgage pass through certificates, and collateralized mortgage obligation (CMOs). It has several subsidiaries in the investment advisory and financial services domain. The fortunes of the company moved massively in the current economic and regulatory environment of low interest rates. The company invests mostly in government backed mortgages.
The stock owed its buoyant performance to the economic stimulus. Little surprise that when the Fed declared tapering of stimulus, share prices of NLY started moving southwards. Their dividend payouts started to dwindle, as they revised their projected revenues as per the higher expected interest rates, and lower yields of securities. The dividend payout is calculated based on the estimated yields of the mortgages the REIT has invested in. The REIT adjusted the conversion ratio of its Convertible Notes downwards. Analysts started to downgrade the share.
However, the fears were a tad too early. The Fed did not withdraw stimulus, and NLY discovered the revisions to expected revenues did not happen. The uncertainty regarding the timing of the Central Banks decision remains. But, given it is an inevitable move, analysts are cautious on the future of the segment, and advise investors to be wary of investing in REITs.
