VNQ - Annaly Capital Management's Total Return Won't Pay the Bills
2024-05-04 03:02:00 ET
The most attractive feature of real estate investment trust (REIT) Annaly Capital Management (NYSE: NLY) is its humongous 13.7% dividend yield. That's why most investors will want to buy it, given that the average yield on the S&P 500 Index is about 1.3% and the average REIT is yielding only about 4%, using Vanguard Real Estate ETF (NYSEMKT: VNQ) as a proxy.
But before you get too caught up in the high yield here, you need to understand that the Annaly story is really about total return.
While Annaly is a REIT , it isn't a landlord. It's fairly easy to understand what property owning REITs do: They buy physical assets and lease them out to tenants. That's what you'd do if you had a rental property. But Annaly is a mortgage REIT, which means it buys mortgage loans that have been pooled into bond-like securities. Its revenue comes from the interest it collects on these bond-like securities, often called something like a collateralized mortgage obligation.
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Annaly Capital Management's Total Return Won't Pay the Bills