Adventurous: Annaly Capital Management
Mortgage real estate investment trusts posted eye-popping returns last year as they cashed in on ultra-low mortgage rates and passed those wide interest rate spreads onto investors in the form of double-digit dividends.
As one of the leaders of the pack, Annaly Capital Management (NYSE:NLY) boasts a whopping 11.5% yield, and it’s trading at just 11 times next year’s earnings, which isn’t too out of line with the rest of the sector.
Nevertheless, potential investors should consider a couple of factors before they ante up. Mortgage rate spreads likely will be tighter this year than they were last year. Regulators and lawmakers recently have cast a critical eye in the direction of mREITs — a sign that NLY and its peers might face curbs on borrowing or see less favorable tax treatment. These factors could potentially bring that lofty yield down to earth.