Core Viewpoint - Annaly Capital Management (NLY) is rated as a Hold, with a leaning towards Buy for long-term investors, due to expected improvements from yield curve steepening [1] Group 1: Analyst Background - The analyst has over 20 years of experience in quantitative research, financial modeling, and risk management [1] - Focus areas include equity valuation, market trends, and portfolio optimization to identify high-growth investment opportunities [1] - Previous role as Vice President at Barclays involved leading teams in model validation, stress testing, and regulatory finance [1] Group 2: Research Approach - The research is co-authored with a partner, combining complementary strengths to provide high-quality, data-driven insights [1] - The approach integrates rigorous risk management with a long-term perspective on value creation [1] - There is a specific interest in macroeconomic trends, corporate earnings, and financial statement analysis to generate actionable investment ideas [1]

Core Viewpoint - Annaly Capital Management (NYSE: NLY) has faced significant challenges leading to a decline in its stock price and dividend, making it less attractive compared to alternatives like Main Street Capital (NYSE: MAIN) which offers a more stable and growing dividend yield [1][2][4][6]. Annaly Capital Management - Annaly Capital Management is a real estate investment trust (REIT) known for its high dividend yield, currently over 12%, which is significantly higher than the S&P 500's yield of 1.2% [1]. - The company has cut its dividend multiple times due to falling earnings and the impact of interest rate changes on its mortgage portfolio, leading to a share price decline of over 40% in the past decade [3][4]. - Annaly's total return over the past decade is around 100%, or 7.3% annualized, which has underperformed compared to the market and other income-focused investments [4]. Main Street Capital - Main Street Capital primarily invests in debt and provides capital to small private companies, generating interest income and potential capital appreciation [5]. - The company has maintained a sustainable monthly dividend, which has never been cut since its IPO in 2007, and has increased its dividend by 136% during this period [6]. - Main Street Capital's current dividend yield stands at 7.2%, supported by its consistent income streams and periodic supplemental quarterly dividends [6].

Core Viewpoint - Annaly Capital Management's performance is closely linked to mortgage rates and Federal Reserve policies, with recent trends indicating lower mortgage rates which may enhance housing affordability and support growth in home purchases and refinancing activities [1][2]. Mortgage Rates and Federal Reserve Policy - Mortgage rates have decreased to 6.09% as of February 12, 2026, down from 6.11% the previous week and significantly lower than 6.87% a year ago [1]. - The Federal Reserve has maintained its benchmark federal funds target range at 3.50-3.75% and is expected to implement two 25-basis-point rate cuts later in 2026, which will reduce funding costs for mortgage REITs [3]. Financial Performance - Annaly's net interest income (NII) rose to $1.14 billion in 2025 from $247.8 million the previous year, reflecting improved earnings due to lower funding pressure [3]. - The Zacks Consensus Estimate for Annaly's 2026 sales indicates a year-over-year growth of 74%, with projected sales of $1.98 billion [16]. Portfolio Diversification - Annaly operates a diversified investment platform that includes Agency mortgage-backed securities (MBS), residential credit, and mortgage servicing rights (MSR), which aids in balancing income generation and risk management [5]. - As of December 31, 2025, Annaly's investment portfolio totaled $104.7 billion, with $92.9 billion in highly liquid Agency MBS, primarily rated 'AAA' [6]. Strategic Initiatives - The company is expanding its MSR platform through a long-term agreement with PennyMac Financial Services, enhancing its servicing capabilities and operational efficiency [7]. - Annaly has exited its commercial real estate and Middle Market Lending businesses to focus on core housing finance operations, allowing for more concentrated capital deployment [8]. Liquidity and Capital Distribution - Annaly maintains a strong liquidity position with $9.4 billion in total assets available for financing, including $6.1 billion in cash and unencumbered Agency MBS [10]. - The company has a current dividend yield of 12.14%, having increased its quarterly cash dividend by 7.7% to 70 cents per share in March 2025 [12]. Market Performance - Annaly's shares have increased by 11.8% over the past six months, outperforming the industry average of 5.7% [20]. - The stock is currently trading at a forward 12-month price-to-tangible book (P/TB) multiple of 1.12X, which is higher than the industry average of 1.05X [23].

Core Insights - Envestnet Asset Management Inc. increased its stake in Annaly Capital Management by 8.8% in Q3, owning 1,176,685 shares valued at approximately $23.78 million [2] - Other institutional investors also raised their positions in Annaly Capital Management, with Hantz Financial Services increasing its holdings by 138.3% [3] Institutional Investment Activity - Envestnet Asset Management Inc. now holds 1,176,685 shares after acquiring an additional 95,201 shares [2] - Hantz Financial Services Inc. raised its stake by 138.3%, owning 9,659 shares valued at $195,000 after purchasing 5,606 shares [3] - Penserra Capital Management LLC increased its position by 3.0%, now owning 82,064 shares worth $1.66 million [3] - Allianz Asset Management GmbH lifted its stake by 3.3%, owning 630,917 shares valued at $12.75 million [3] - American Assets Capital Advisers LLC increased its stake by 14.9%, now holding 27,373 shares worth $553,000 [3] - Mission Wealth Management LP acquired a new stake worth about $217,000 [3] - 51.56% of Annaly Capital Management's stock is owned by hedge funds and institutional investors [3] Stock Performance - Annaly Capital Management's stock opened at $23.06, with a market cap of $15.75 billion and a P/E ratio of 8.29 [4] - The stock has a 50-day moving average price of $23.08 and a 200-day moving average price of $21.92 [4] - The twelve-month low and high for the stock are $16.59 and $24.52, respectively [4] Financial Performance - Annaly Capital Management reported an EPS of $0.74 for the last quarter, exceeding analysts' estimates of $0.72 by $0.02 [5] - The company generated revenue of $1.06 billion, significantly higher than the estimated $567.67 million [5] - The net margin was 34.02%, and the return on equity was 15.80% [5] - Analysts project an EPS of 2.81 for the current fiscal year [5] Dividend Information - Annaly Capital Management declared a quarterly dividend of $0.70 per share, representing an annualized dividend of $2.80 and a yield of 12.1% [6] - The dividend payout ratio is 100.72% [6] Analyst Ratings - Royal Bank Of Canada raised its target price for Annaly Capital Management from $23.00 to $25.00, rating it "outperform" [7] - Piper Sandler reiterated an "overweight" rating with a price objective of $25.00 [7] - Wells Fargo & Company also set a target price of $25.00, maintaining an "overweight" rating [7] - Keefe, Bruyette & Woods increased their price target from $23.25 to $25.00, rating it "outperform" [7] - JPMorgan Chase & Co. raised their price objective from $21.00 to $22.00, giving it an "overweight" rating [7] - The average rating for the stock is "Moderate Buy" with a consensus target price of $24.11 [7] Company Overview - Annaly Capital Management, Inc. is a publicly traded REIT focused on generating income through investments in mortgage-related assets [8] - The company engages in acquiring, financing, and managing a diversified portfolio of agency and non-agency residential mortgage-backed securities, commercial mortgage-backed securities, and other real estate debt instruments [8] - Founded in 1997 and headquartered in New York City, Annaly is one of the largest mortgage REITs in the U.S. [9]

Portfolio Composition - Annaly Capital Management's portfolio composition as of December 31, 2025, included 89% Agency assets, 7% Residential Credit, and 4% Mortgage Servicing Rights (MSR) [25] - Annaly's investment strategy includes a focus on Agency mortgage-backed securities, non-Agency residential whole loans, and mortgage servicing rights, adapting to market conditions [32] Financial Metrics - The company had $81.9 billion in repurchase agreements outstanding as of December 31, 2025, reflecting its reliance on this financing method for Agency mortgage-backed securities and residential credit securities [36] - The economic leverage ratio was 5.6:1 as of December 31, 2025, maintaining a conservative posture below the target of 10:1 [42] - The GAAP capital ratio was reported at 11.9% as of December 31, 2025, indicating a stable capital structure [42] Securitization Activities - Annaly issued 29 OBX securitizations backed by $15.2 billion of residential whole loans during the year ended December 31, 2025, under its private-label securitization program [39] Operational Efficiency - The company has established strategic relationships with key mortgage loan originators and technology firms to enhance operational efficiency and access to quality originations [21] - Annaly's operating platform supports diverse asset management through investments in technology and infrastructure, enhancing operational efficiency [45] - The company has invested in technology to enhance operational efficiencies, including centralized collateral management and automation-based processes [46] Risk Management - The company maintains a risk appetite statement that guides its investment management activities, focusing on income generation and capital preservation [26] - The company’s risk management framework is designed to identify, measure, monitor, and control key risks, which is critical to its business strategy [48] Workforce and Employee Well-being - As of December 31, 2025, the company had 212 employees, reflecting its commitment to maintaining a skilled workforce [54] - The company has a diverse workforce, with 57% of its Operating Committee and 60% of its overall population identifying as either female and/or racially/ethnically diverse [59] - The company emphasizes employee well-being through various benefits, including health coverage, 401(k) plans, and mental health initiatives [61] Corporate Governance - The company has a comprehensive approach to corporate governance, ensuring compliance with ethical standards and applicable laws [73] - The Board is composed of a majority of independent directors, with all directors elected annually and an independent Chair of the Board appointed [74] - The company has adopted a Code of Business Conduct and Ethics applicable to directors, officers, and employees [74] - Executive officers are subject to two clawback policies covering financial restatements and misconduct [74] - Stockholders holding 25% of common stock can call a special meeting, enhancing shareholder rights [74] - The company has an Insider Trading Policy prohibiting directors, officers, and employees from trading based on material nonpublic information [74] - The company has established stock ownership guidelines and holding restrictions for executive officers and directors [74] Transparency and Reporting - The company provides financial statements and supplementary data in its Form 10-K, available on its website [78] - The company has a commitment to transparency, making various reports and governance documents available to stockholders [77] Market Environment - The company operates in a highly competitive market, facing challenges in acquiring desirable investments due to competition from financial institutions and other REITs [72] Capital Distribution - The company intends to distribute at least 90% of its REIT taxable income to stockholders to maintain REIT status, aiming for 100% to avoid tax liabilities [76] - The company may return capital through stock buybacks or dividends, depending on the risk-adjusted returns from new investments [76] Corporate Philanthropy - The company actively engages in corporate philanthropy and employee volunteerism, contributing to community stability and development [64] Leadership - The company’s executive team includes experienced leaders, such as David L. Finkelstein, who has over 25 years of experience in fixed income investments [49] Regulatory Compliance - The company is subject to extensive regulatory requirements, including compliance with the Investment Advisers Act and various consumer protection laws [70]

Core Insights - The webinar discusses high dividend investment opportunities, focusing on two specific picks that are currently favorable in the market [2][4]. Company Overview - High Dividend Opportunities (HDO) is celebrating its 10-year anniversary with Seeking Alpha, having grown to be the largest dividend service on the platform [4][5]. - Will Barton, a key figure at HDO, has been part of the service for seven years and emphasizes the importance of cash flow from investments [4][5]. Investment Strategy - HDO employs an income method that focuses on generating cash flow from a diversified portfolio of at least 42 income-producing stocks, aiming for consistent income growth regardless of market conditions [10][11]. - The strategy emphasizes the importance of not relying solely on capital gains, instead prioritizing cash flow to meet ongoing financial obligations [9][12]. Market Conditions - Current market conditions are favorable for dividend investing, with high interest rates leading to lower prices for dividend-paying stocks, creating buying opportunities [19][20]. - The average yield targeted by HDO is over 9%, with the portfolio yielding over 10% for the past year and a half due to favorable interest rate dynamics [18][19]. Specific Investment Picks - The first investment pick discussed is Annaly Capital Management (NLY), which has a long history in the mortgage-backed securities (MBS) sector and is currently positioned to benefit from high coupon mortgages [29][30]. - The second pick is AGNC Investment Corp., which operates similarly to NLY and has been able to issue equity at favorable prices, allowing for portfolio expansion [45][47]. Economic Outlook - The company believes that interest rates will eventually decline, leading to a favorable environment for dividend-paying stocks as lower rates typically increase their attractiveness [53][60]. - Long-term demographic trends and technological advancements are expected to contribute to lower inflation and, consequently, lower interest rates, which would benefit the business models of companies like NLY and AGNC [56][59].

Core Insights - Annaly (NLY) is expanding its portfolio of mortgage-backed securities and performed well in the fourth fiscal quarter, beating consensus earnings estimates by $0.01 per share but missing the top line expectations from Wall Street [1] Financial Performance - In the fourth fiscal quarter, Annaly reported earnings that exceeded consensus estimates by $0.01 per share [1] - However, the company did not meet Wall Street's revenue expectations [1] Portfolio Expansion - Annaly is rapidly increasing its holdings in mortgage-backed securities, indicating a strategic focus on this asset class [1]

Core Viewpoint - The mortgage REIT sector offers high yields, but preferred shares present a lower-risk alternative for investors seeking income without the volatility associated with common stock [1] Company Overview - Annaly Capital Management is identified as a mortgage REIT with a portfolio primarily consisting of agency mortgage-backed securities, which have an attractive credit risk profile due to agency guarantees [16] - The company has preferred shares that are rated with the lowest risk in the mortgage REIT sector, making them suitable for conservative buy-and-hold investors [15] Preferred Shares Analysis - NLY-G (NLY.PR.G) is highlighted as an interesting preferred share due to its lower floating rate compared to other preferred shares [2] - The yield to call for NLY-G is 14.1%, which is more favorable than other preferred shares with a risk rating of 1, although it is unlikely to be realized under realistic scenarios [4] - The current price of NLY-G is $25.06, with a hold rating and price targets ranging from $23.15 to $25.16, reflecting an 8.19% yield [3] Scenario Analysis - Scenario 1: If short-term rates rise to 7%, the dividend rate on NLY-G would increase, but Annaly Capital would likely not call the preferred share due to lack of superior financing options [6][7] - Scenario 2: A significant rise in short-term rates would provide investors with alternative higher-yielding opportunities, limiting the price increase of NLY-G [8][9] - Scenario 3: If short-term rates fall, the dividend rate on NLY-G would decrease, potentially leading to disappointment among investors if it falls below 5% [11][14] - Scenario 4: A return to near-zero short-term rates could push the dividend rate below 5%, which would be unattractive for preferred share investors [12] Comparison with Other Preferred Shares - NLY-G's dividend rate of 4.172% is lower than NLY-F's 4.993%, indicating a material difference in credit spreads [13]

Core Viewpoint - Annaly Capital Management, Inc. (NYSE:NLY) is identified as one of the most undervalued REIT stocks currently available for investment, with a recent upgrade from Neutral to Buy by BTIG, which has set a price target of $25 for the shares [1]. Group 1: Investment Potential - The firm anticipates that Annaly Capital Management, Inc. (NYSE:NLY) could see additional upside if mortgage-backed securities spreads compared to Treasuries, currently at approximately 115 basis points, narrow further [2]. - A more stable stock valuation for NLY is expected if spreads expand again amid rising interest rate volatility [2]. Group 2: Market Conditions - BTIG has noted a decline in long-term interest rates, which may increase prepayment vulnerability in NLY's mortgage servicing rights (MSR) and non-qualified mortgage (non-QM) portfolios [3]. - The firm's assessment includes an expectation that the Trump presidency may attempt to engineer lower mortgage rates, potentially benefiting NLY [3]. Group 3: Company Overview - Annaly Capital Management, Inc. (NYSE:NLY) operates as a diversified capital manager in the mortgage finance sector, with a portfolio that includes securities, loans, and equity in the mortgage finance market [3].

Core Viewpoint - Annaly Capital Management, Inc. is showing positive financial performance and growth potential, supported by recent earnings and analyst price target adjustments [1][6]. Financial Performance - In Q4 2025, Annaly reported earnings available for distribution (EAD) per average share of 74 cents, exceeding the Zacks Consensus Estimate of 72 cents, indicating a positive trend in earnings growth [2][6]. - For the full year of 2025, Annaly's EAD per share was $2.92, surpassing the Zacks Consensus Estimate of $2.90 and showing growth from the previous year's $2.70 [4]. Asset Management - The company's book value per share increased to $20.21 from $19.15 year-over-year, reflecting effective management of assets and liabilities [3][6]. - The average yield on interest-earning assets improved to 5.44% during the quarter, enhancing profitability [3]. Market Activity - Annaly's current trading price is $23.85, with a market capitalization of approximately $16.29 billion and a trading volume of 5,836,568 shares [5]. - The stock has fluctuated between a low of $23.72 and a high of $24.28 today, with a yearly high of $24.52 and a low of $16.60 [5]. Analyst Outlook - Wells Fargo analyst Donald Fandetti set a new price target for NLY at $25, reflecting confidence in the company's financial health and future prospects [1][6].