Annaly Capital Management (NLY)
Annaly Capital Management (NLY) is a large mortgage REIT that invests in Government-Sponsored Entity Mortgage Backed Securities (GSE-MBS). NLY and other so-called “agency” mREITs thrive when borrowing is cheap and interest rate spreads are wide. If the Fed does indeed keep interest rates low throughout the year, mREITs like NLY could do very well for investors in 2014.
NLY offers a couple of big advantages for an mREIT: size and price. It boasts a market cap of $10.3 billion, and last year’s selloff has left it trading under $11. It has a one-year return of 9% and a current dividend yield of 11%. NLY is up nearly 9% year-to-date.
For investors chasing dividend yield, today’s low mortgage rates are enabling mREITs to pay out hefty — sometimes even double-digit — dividends. A note of caution, however: mREITs can be riskier than their property-based counterparts if interest rates rise.