2024-01-23 23:12:56 ET
Summary
- Annaly Capital 6.95% Preferred Shares Series F offers a high yield with less risk compared to the company's common equity.
- The preferred shares have a variable rate tied to SOFR, resulting in increased payouts as interest rates rise.
- While there is still interest rate risk, the preferred shares can serve as a hedge against conventional bonds and preferreds in an investor's portfolio.
- Unlike most preferreds and fixed-rate bonds, these preferreds decline in value when rates fall.
- For this reason, I consider Annaly Capital Series F preferred a qualified buy: worth holding in a diversified portfolio along with uncorrelated assets that gain from lower rates.
Annaly Capital ( NLY ) is a mortgage REIT that is quite well known on Seeking Alpha for its 13.5% dividend yield. If you're a dividend investor, that's the kind of payout that will make you stand up and take notice. However, there's another Annaly Capital security that has almost as high a yield, but with much less risk:
Annaly Capital 6.95% Preferred Shares Series F ( NLY.PR.F ). These preferred shares are cumulative, meaning that the company cannot just deny you the dividend forever. They are also variable rates, meaning that their payout varies with the SOFR rate over time. The variable rate quality has resulted in NLY.PR.F's payout rising over the last five years, even though these shares don't participate in growth. Beginning in 2022, the Federal Reserve embarked on a series of interest rate hikes, the fastest in modern history. As a result, the payout and yield on Annaly Capital Series F preferreds increased between the beginning of 2022 and today....
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Annaly Capital: 10.5% Yield Preferreds Best The Equity