Here's How Much Income $25,000 Invested in This 13%-Yielding Dividend Stock Generates. History Says Don't Count on It Staying That Way.
Key Points
Annaly Capital Management has hiked its dividend twice over the past two years.
Its payout remains well below its peak.
Annaly Capital Management (NYSE:NLY) currently yields an eye-popping 13.8%, more than 10 times the S&P 500's 1.1% yield. At that rate, a $25,000 investment would generate $3,450 in annual dividends.
While that sounds really enticing, the mortgage REIT's history says investors shouldn't bank on it maintaining that amount.
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Annaly's spotty dividend history
Annaly Capital Management currently pays a quarterly dividend of $0.75 per share. The REIT raised its payment to that level this past June from $0.70 per share. The REIT also increased its dividend in early 2025 from $0.65 per share.
That upward trend is exactly what investors would want to see in a dividend. However, there's more to the story here. Annaly Capital Management previously cut its dividend from $0.88 per share to $0.65 per share in early 2023. That was one of several dividend cuts throughout its history. At its peak, the company paid a split-adjusted $3.00 per share in dividends each quarter. Today, it pays $3.00 per year in dividends, a 75% drop from the high.
The main factor driving the dividend variability is the REIT's earnings volatility. As a mortgage REIT, it's highly sensitive to changes in interest rates. As rates move, the spread between its interest income and costs fluctuates, impacting its earnings.
On a more positive note, Annaly has diversified its business over the years, adding residential credit and mortgage service rights platforms to its core Agency investments. As a result, the earnings profile of its portfolio is more durable than it was in the past. Still, given its interest rate sensitivities, investors can't bank on the long-term durability of its dividend. It's best for more risk-tolerant investors who are seeking a potentially lucrative income stream.
Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.