Annaly Capital Management's EAD Topped Its Dividend for a 9th Straight Quarter. Here's Why That Matters for Its 12.5%+ Yielding Payout.

Annaly Capital Management (NYSE: NLY) towers supra astir dividend stocks. The existent property concern spot (REIT) presently has a dividend output of much than 12.5%. That's implicit 10 times higher than the S&P 500's existent output of astir 1.1%.

A double-digit dividend output is usually a agleam reddish emblem for income investors. However, that's not the lawsuit with the owe REIT's big-time payout. That's due to the fact that the 1 metric that matters astir for its dividend continues to apical its payout.

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It's each astir Annaly's EAD

Investors request to displacement their absorption erstwhile evaluating a REIT's fiscal results from reported nett income to its underlying earnings. That metric tin alteration by REIT, arsenic immoderate usage funds from operations (FFO) portion others usage an adjusted net metric. For Annaly, the metric that matters astir for its dividend is its net disposable for organisation (EAD).

During the 2nd quarter, the owe REIT generated $0.79 per stock of EAD, comfortably supra the $0.75 per stock dividend it paid. That marked the ninth consecutive 4th that Annaly's EAD exceeded its dividend payment:

Annaly's rising EAD implicit the past 9 quarters has enabled it to summation its dividend doubly during this period, including a caller boost from $0.70 to $0.75 per share. That has reversed the anterior downtrend successful Annaly's EAD and dividend.

Will Annaly's EAD stay supra its dividend?

Annaly's caller determination to rise its dividend reflects "the durable net powerfulness of our portfolio," stated CEO David Finkelstein successful the second-quarter net property release. Several factors lend to this durability, including Annaly's standard (it's the largest residential owe REIT by marketplace cap), diversification (it invests successful Agency MBS, residential credit, and owe servicing rights (MSR)), and fiscal spot (economic leverage of 5.6 times, down from 5.7x successful the anterior 4th and ample liquidity).

Those factors thrust the REIT's anticipation that it tin proceed to make charismatic risk-adjusted returns crossed marketplace cycles. It presently sees meaningful concern opportunities crossed its 3 strategies. Annaly tin gain levered returns of 11% to 13% connected caller MSR investments, 12% to 15% connected residential credit, and 14% to 16% connected Agency MBS investments. It has the flexibility to allocate caller superior to the champion concern opportunities it identifies. That was successful Agency MBS during the 2nd quarter, arsenic it grew that portfolio by $3 cardinal portion maintaining the size of its residential recognition and MSR portfolios. As agelong arsenic Annaly tin gain precocious returns connected caller investments, it should beryllium capable to proceed its inclination of generating EAD successful excess of its dividend.