This More Than 14%-Yielding Dividend Stock is Surprisingly Raising Its Already Monster Payout

Core Viewpoint - Annaly Capital Management offers a high dividend yield of over 14%, significantly higher than the S&P 500, and has recently increased its dividend despite past cuts [1][2]. Investment Strategy - The company employs a three-pronged investment strategy, utilizing leverage to invest in additional mortgages and profiting from the spread between interest paid and income earned [4]. - Annaly's investment portfolio includes Agency MBS, mortgage servicing rights (MSRs), and residential credit, with a focus on prime jumbo mortgages [5]. Financial Performance - Annaly generated $0.72 per share of earnings available for distribution (EAD) for two consecutive quarters, indicating a recovery in earnings after previous declines [5][7]. - The company raised its quarterly dividend from $0.65 to $0.70 per share, marking a partial reversal of a previous cut from $0.88 to $0.65 earlier in 2023 [7]. Portfolio Composition - As of early 2023, Annaly had an $85.5 billion investment portfolio, which decreased to $84.9 billion by the first quarter of the current year, with improved returns across its investment strategies [9]. - The company has shifted some capital towards residential credit and MSRs, allowing for less leverage while still achieving higher returns [9][10]. Market Outlook - The CEO expressed confidence in the company's diversified housing finance portfolio, suggesting it can deliver superior risk-adjusted returns over the long term [11]. - The mortgage investment strategy is characterized as high-risk but potentially lucrative, appealing to risk-tolerant investors [12].