The report also reminded readers that while dividends are bound to fall somewhat, they're still well above those of competing investments such as high-yield corporate bonds. Many investors are shocked to see these yields on so-called "junk bonds" being pushed lower by global central banks who are intending to stimulate their economies. Junk yields fell to a record low 6.95% last month, according to a Bank of America Merrill Lynch index.
"It's not just at the mortgage REITs where the returns in this market are being put under assault," New York-based Annaly's Denahan-Norris said Tuesday in the Bloomberg telephone interview. "It's the general global landscape where you have an incredible mispricing of risk that's being delivered at the hands of academics at the central banks of the world."
To support the stock's price and compensate for the impending yield reduction in the current $2.00-per-share annual dividend, the stock buyback program will act as a sort of "invisible dividend" that has already helped the share's price to rally.
NLY is the biggest and the best of the mortgage REITS, and with their expertise in this area they'll make the adjustments and decisions needed to support the stock's price. Keep in mind that the company's Chairman of the Board and co-CEO, Michael Farrell owns an astonishing 2,706,392 shares of NLY as of Oct. 1. As of Tuesday's closing price of $15.72 that equals an investment of $42,544,482.
Investment BonusIt's helpful to remember that when you own shares of NLY you're also indirectly invested in FIDAC, a wholly owned subsidiary of Annaly Capital Management. Formed in 1994 by Michael Farrell and acquired by Annaly in 2004, FIDAC is a SEC-registered investment adviser. FIDAC specializes in managing residential and commercial mortgage loans and securities, CDO liquidations and provides other financial services. The team that manages Annaly plays the same roles at FIDAC. FIDAC's team of investment professionals has built a successful long-term track record through some of the most challenging fixed-income markets in memory. As a service provider to the public and private markets, FIDAC manages various investment vehicles including serving as external manager for Chimera Investment (CIM) and also for Crexus Investment (CXS).
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