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1. Company Snapshot

1.a. Company Description

Annaly Capital Management, Inc., a diversified capital manager, engages in mortgage finance and corporate middle market lending.The company invests in agency mortgage-backed securities, mortgage servicing rights, Agency commercial mortgage-backed securities, non-Agency residential mortgage assets, residential mortgage loans, credit risk transfer securities, corporate debts, and other commercial real estate investments.It has elected to be taxed as a real estate investment trust (REIT).


As a REIT, it is not subject to federal income tax to the extent that it distributes its taxable income to its shareholders.The company was founded in 1996 and is based in New York, New York.

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1.b. Last Insights on NLY

Annaly Capital Management's recent performance was driven by improved asset yields and servicing income, supporting its Q3 earnings beat. A $1.5 billion buyback plan and $8.8 billion liquidity base underscore its drive to sustain strong shareholder returns. Easing mortgage rates and strategic shifts also contributed to its growth. The company's 13% dividend yield appears well-supported by its earnings. Additionally, a conservative balance sheet and strict leverage discipline have enabled the company to outperform peers. Its dividend sustainability is also attributed to stabilized inflation and improved net interest spreads.

1.c. Company Highlights

2. Annaly Capital Management's Q3 2025 Earnings: A Strong Performance

Annaly Capital Management reported earnings available for distribution (EAD) per share of $0.73, consistent with Q2 and exceeding the dividend for the quarter. The company's book value per share increased 4.3% to $19.25. The actual EPS came out at $0.73, beating estimates of $0.72. The company's economic return was 8.1% for the quarter and 11.5% year-to-date, driven by its diversified housing finance strategy.

Publication Date: Oct -26

📋 Highlights
  • Economic Return: Generated 8.1% quarterly return and 11.5% year-to-date, driven by diversified housing finance strategies.
  • Book Value Growth: Book value per share rose 4.3% to $19.25, reflecting portfolio strength and capital efficiency.
  • Equity Raise: Raised $1.1 billion in Q3, including $800 million via ATM, improving liquidity and leverage to 5.7x.
  • ROE Performance: Achieved 17% return on equity, supported by low volatility and effective hedging (60-65 bps cost).
  • MSR Expansion: MSR portfolio grew to $3.5 billion, offering durable cash flows with minimal negative convexity exposure.

Financial Performance

The company's Agency MBS portfolio ended the quarter at $87 billion in market value, up 10% quarter-over-quarter. Residential Credit assets totaled $6.9 billion in economic market value, with non-Agency gross securitizations reaching $160 billion year-to-date. The MSR portfolio increased by $215 million in market value to $3.5 billion. The efficiency ratio improved to 1.41% for the quarter, and the OpEx-to-equity ratio was 1.34% for the quarter.

Valuation and Dividend Yield

With a Price-to-Book Ratio of 0.87 and a Dividend Yield of 13.13%, Annaly's valuation appears attractive. The company's ROE was just shy of 17%, and the net interest income (NII) has been stable over the last four quarters. Management expects this stability to continue, driven by a low-leverage portfolio and a stable swap portfolio.

Portfolio Strategy and Outlook

The company has been rotating its portfolio into specified pools, particularly those with higher coupons, as they offer a better carry profile and longer-dated options. The MSR market has seen an increase in bulk supply, driven by higher mortgage origination volumes and industry capacity constraints. Management remains positive on the outlook, expecting the investment strategies to be well-positioned for the balance of the year, given declining macro volatility and additional Fed cuts.

Risk Management and Hedging

David Finkelstein addressed concerns about rate risk, noting that while current coupon spreads are 28 basis points lower, the portfolio's duration is close to flat, and they are not looking to take significant rate risk. The company feels good about earning its dividend and maintaining a stable NII going forward, with a 92% hedge ratio.

Growth Prospects

Analysts estimate next year's revenue growth at 27.6%. The company's non-QM issuance is expected to continue growing, with a potential market share of 10%. The presence of the GSEs in the market could potentially stabilize spreads and lower volatility, but it's difficult to navigate the regulatory path.

3. NewsRoom

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High-Yield Carnage In 2026

Feb -03

Source: seekingalpha.com

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Annaly Capital Management Inc $NLY Shares Purchased by Mediolanum International Funds Ltd

Feb -02

Source: defenseworld.net

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8% High Dividend Yield From Annaly Capital Preferred Share

Jan -30

Source: seekingalpha.com

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Annaly Q4 Earnings Surpass Estimates, Book Value Improves Y/Y

Jan -29

Source: zacks.com

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Annaly Capital Management, Inc. (NLY) Q4 2025 Earnings Call Transcript

Jan -29

Source: seekingalpha.com

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NewYear Barron's Pro-Picks: 2 IDEAL January DiviDogs

Jan -29

Source: seekingalpha.com

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Annaly Capital Management (NLY) Beats Q4 Earnings Estimates

Jan -29

Source: zacks.com

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Annaly Capital Management, Inc. Reports 4th Quarter 2025 Results

Jan -28

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.00%)

6. Segments

Real Estate Investment Trust

Expected Growth: 1%

Annaly Capital Management, Inc.'s Real Estate Investment Trust (REIT) growth is driven by increasing demand for mortgage-backed securities, diversification into commercial real estate, and a strong balance sheet. The company's ability to navigate interest rate fluctuations and its experienced management team also contribute to its growth.

7. Detailed Products

Agency Mortgage-Backed Securities

Annaly Capital Management, Inc. invests in agency mortgage-backed securities, which are guaranteed by government-sponsored entities such as Fannie Mae and Freddie Mac.

Non-Agency Residential Mortgage-Backed Securities

Annaly Capital Management, Inc. invests in non-agency residential mortgage-backed securities, which are not guaranteed by government-sponsored entities.

Commercial Mortgage-Backed Securities

Annaly Capital Management, Inc. invests in commercial mortgage-backed securities, which are backed by commercial properties such as office buildings and shopping centers.

Residential Mortgage Servicing Rights

Annaly Capital Management, Inc. acquires and manages residential mortgage servicing rights, which provide a steady stream of income from mortgage servicing fees.

Middle Market Lending

Annaly Capital Management, Inc. provides financing to middle-market companies through its middle market lending platform.

8. Annaly Capital Management, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Annaly Capital Management, Inc. is medium. While there are alternative investment options available, the company's diversified portfolio and expertise in mortgage-backed securities mitigate the threat.

Bargaining Power Of Customers

The bargaining power of customers is low for Annaly Capital Management, Inc. as the company's customers are primarily institutional investors who have limited negotiating power.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium for Annaly Capital Management, Inc. as the company relies on a diverse range of suppliers for its mortgage-backed securities, but has some negotiating power due to its scale.

Threat Of New Entrants

The threat of new entrants is low for Annaly Capital Management, Inc. due to the significant barriers to entry in the mortgage-backed securities market, including regulatory hurdles and the need for specialized expertise.

Intensity Of Rivalry

The intensity of rivalry is high for Annaly Capital Management, Inc. as the company operates in a highly competitive market with many established players, and must continually innovate and adapt to maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 53.98%
Debt Cost 11.86%
Equity Weight 46.02%
Equity Cost 11.86%
WACC 11.86%
Leverage 117.31%

11. Quality Control: Annaly Capital Management, Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Growth: 6.1

Quality: 6.6

Yield: 10.0

Momentum: 4.5

Volatility: 9.7

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Annaly Capital Management

A-Score: 7.2/10

Value: 6.9

Growth: 3.9

Quality: 5.6

Yield: 10.0

Momentum: 7.0

Volatility: 9.7

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A-Score: 7.1/10

Value: 7.1

Growth: 3.9

Quality: 5.9

Yield: 10.0

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Quality: 6.9

Yield: 10.0

Momentum: 6.0

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Arbor Realty Trust

A-Score: 6.2/10

Value: 8.1

Growth: 4.4

Quality: 7.3

Yield: 10.0

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AGNC Investment

A-Score: 6.0/10

Value: 4.1

Growth: 3.1

Quality: 4.0

Yield: 9.0

Momentum: 6.0

Volatility: 10.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

22.83$

Current Price

22.83$

Potential

-0.00%

Expected Cash-Flows