Annaly Capital Management Dividend Safety: A 10th Cut in 10 Years for a 12% Yielder?
Today, Investment U’s Income Expert, Marc Lichtenfeld, takes a look at Annaly Capital Management’s dividend safety.
In February, I analyzed the dividend safety of Annaly Capital Management (NYSE: NLY), one of the most frequently requested stocks in the Safety Net column.
At the time, I said that until the company proves it can lift net interest income above how much it pays in dividends, it gets a very solid “F” rating. And sure enough, a few months later, it cut its quarterly dividend from $0.25 per share to $0.22.
Back in February, Annaly was expected to generate $1.77 billion in net interest income in 2020. Net interest income is the money a mortgage real estate investment trust makes by borrowing cash short term and lending it out long term.
That would have been enough to cover the projected $1.43 billion in dividends.
Today, the net interest income forecast has been just about cut in half. Now the company is expected to generate only $955 million while paying out $1.28 billion.
That earns a demerit from SafetyNet Pro.
The dividend forecast is lower because Annaly reduced the dividend in the second quarter.
You don’t have to be a trained market analyst to look at this chart and know that things aren’t going in the right direction for the company and its dividend.
Some companies will do whatever it takes to sustain the dividend. Even in tough times, they’ll dip into cash or raise debt – anything to continue paying shareholders the same or even a higher dividend.
Annaly is not one of those companies.
Annaly Capital Management Dividend Safety Overview
Since 2011, it has cut its dividend nine times. In fact, since then, the dividend has fallen by 66% while its stock has unsurprisingly slid 56%.
A $0.22 per share quarterly dividend may sound enticing, given that it comes out to a 12% annual yield based on the current price.
But the likelihood of that dividend staying at $0.22 is about the same as the likelihood that Donald Trump and Nancy Pelosi become BFFs (best friends forever) and enjoy picnics together every Sunday afternoon.
Look for another dividend cut from Annaly within the next 12 months.
Dividend Safety Rating: F
As you can see, Annaly Capital Management’s dividend safety is at a very high risk of being cut. As history shows, this isn’t anything new for one of the largest real estate investment trusts.
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About Marc Lichtenfeld
Marc Lichtenfeld is the Chief Income Strategist of Investment U’s publisher, The Oxford Club. He has more than three decades of experience in the market and a dedicated following of more than 500,000 investors.
After getting his start on the trading desk at Carlin Equities, he moved over to Avalon Research Group as a senior analyst. Over the years, Marc’s commentary has appeared in The Wall Street Journal, Barron’s and U.S. News & World Report, among other outlets. Prior to joining The Oxford Club, he was a senior columnist at Jim Cramer’s TheStreet. Today, he is a sought-after media guest who has appeared on CNBC, Fox Business and Yahoo Finance.
Marc shares his financial advice via The Oxford Club’s free daily e-letter called Wealthy Retirement and a monthly, income-focused newsletter called The Oxford Income Letter. He also runs four subscription-based trading services: Technical Pattern Profits, Penny Options Trader, Oxford Bond Advantage and Predictive Profits.
His first book, Get Rich with Dividends: A Proven System for Earning Double-Digit Returns, achieved bestseller status shortly after its release in 2012, and the second edition was named the 2018 Book of the Year by the Institute for Financial Literacy. It has been published in four languages. In early 2018, Marc released his second book, You Don’t Have to Drive an Uber in Retirement: How to Maintain Your Lifestyle without Getting a Job or Cutting Corners, which hit No. 1 on Amazon’s bestseller list. It was named the 2019 Book of the Year by the Institute for Financial Literacy.