Core Viewpoint - Annaly Capital Management offers a significantly high dividend yield, exceeding 10 times that of the S&P 500, due to its legal obligation to distribute 90% of its taxable income as dividends [1][6]. Group 1: Company Overview - Annaly Capital Management operates as a mortgage REIT, investing in Agency mortgage-backed securities, non-agency residential mortgages, and mortgage servicing rights, which typically yield low-risk, fixed-rate returns [3]. - The company utilizes leverage to enhance returns, currently achieving double-digit yields across its investment strategies [3]. Group 2: Financial Performance - In the third quarter, Annaly reported earnings available for distribution (EAD) of $0.73 per share, an increase from $0.66 per share in the same quarter last year, comfortably covering its dividend payment of $0.70 per share [4]. - The EAD for Annaly was consistent, with $0.73 per share in the second quarter and $0.72 per share in the previous two quarters, allowing for a dividend increase from $0.65 per share earlier this year [4]. - Historical EAD figures for 2022 ranged from $0.89 to $1.22 per share, supporting a quarterly dividend of $0.88 per share [5]. Group 3: Dividend Policy - Annaly is legally required to distribute nearly all of its taxable net income as dividends, which results in its high yield, but this payout is subject to fluctuations based on earnings [6].

Core Insights - 2025 has been a successful year for mortgage REITs, particularly those focused on safer agency securities, benefiting from lower funding costs on repurchase agreements [1] Group 1: Performance of Mortgage REITs - Mortgage REITs (mREITs) with a focus on safer agency securities have performed well in 2025 [1] - The success of these mREITs is attributed to lower funding costs, which have positively impacted their financial performance [1] Group 2: Investment Approach - The investment strategy discussed includes a combination of long stock positions with covered calls and cash secured puts, emphasizing a fundamental long-term perspective [1]

Core Insights - 2025 has been a successful year for mortgage REITs, with performance varying based on credit exposure, particularly benefiting those focused on safer agency securities due to lower funding costs on repurchase [1] Group 1: Industry Performance - Mortgage REITs focused on safer agency securities have performed well in 2025 [1] - The success of these mREITs is attributed to lower funding costs [1]

There are 7 agency mortgage REITs. Three of them have demonstrated that they are substantially better than the other 4. It feels like a system where investors would generally be rewarded very well by a system that could: Buy the first 3 Fund the position with proceeds from shorting the other 4. Of course, there are difficulties to this. If the investor had to supply the capital to cover their short position and to fund their long position, it would completely break the model. The system would have earned ...

Core Insights - AGNC Investment has achieved a total return of 32% in 2025, significantly outperforming the VanEck Mortgage REIT Income ETF, which recorded a gain of approximately 13% [1] Company Performance - AGNC Investment is recognized as one of the best performing mortgage REITs in 2025, indicating strong market performance and investor interest [1] Investment Strategy - The article reflects a long-term fundamental investment approach, particularly focusing on REITs, preferred stocks, and high-yield bonds, suggesting a strategic blend of long stock positions with covered calls and cash secured puts [1]

Core Viewpoint - Rithm Capital Corp. is making headlines in the mortgage REIT sector due to its strategic shift towards becoming an alternative asset manager, which has garnered significant investor interest [1]. Company Overview - Rithm Capital Corp. (RITM) is transitioning from a mortgage REIT to an alternative asset manager, indicating a significant change in its business model [1]. - The company has been under observation by investors who are eager to see how this transition unfolds [1]. Industry Context - The mortgage REIT sector has experienced various cycles, including the rise and fall of subprime mortgage REITs and a resurgence post the Great Financial Crisis [1]. - The expansion of mortgage REITs into mortgage servicing rights and other real estate-related investments reflects the evolving landscape of the industry [1].

Core Viewpoint - The article compares two high-yielding mortgage REITs, AGNC Investment and Starwood Property Trust, highlighting the differences in their investment strategies and risk profiles, with Starwood being presented as a more stable option for income investors. Group 1: AGNC Investment - AGNC Investment offers a high dividend yield of over 14%, significantly higher than the S&P 500's 1.2% yield [1] - The REIT primarily invests in Agency residential mortgage-backed securities (MBS), which are low-risk but also yield lower returns [3] - AGNC uses leverage to enhance returns, achieving a return on equity of around 17% in the third quarter, aligning with its cost of capital [4] - The REIT has a history of dividend cuts, reducing its payment from $0.22 per share in 2014 to $0.12 per share currently, with the last cut occurring in 2020 [6] Group 2: Starwood Property Trust - Starwood Property Trust has a diversified portfolio, with 53% in commercial real estate loans, 9% in residential loans, and 10% in infrastructure-backed loans, providing stable interest income [7] - The REIT also invests directly in properties, generating stable and steadily rising rental income [9] - Starwood's recent acquisition of Fundamental Income Properties for $2.2 billion enhances its diversification and is expected to provide stable cash flow with a 17-year average lease term and a 2.2% annual lease escalation rate [10] - Starwood has maintained a stable dividend rate for over a decade without any reductions, making it a reliable income source [11] Group 3: Investment Strategy Comparison - AGNC's focused investment strategy allows for high returns but carries more risk, as evidenced by its declining dividend history [13] - In contrast, Starwood's diversified investment strategy reduces risk and provides flexibility to adapt to market conditions, allowing it to capitalize on various investment opportunities [12]

Financial Performance - GAAP Net Income was $43 million, or $011 per share[12] - Net Asset Value was $2251 million, or $599 per share as of September 30, 2025[12] - Net Investment Income was $85 million, or $023 per share[12] - The CLO portfolio grew by 20% from $3169 million as of June 30, 2025, to $3796 million as of September 30, 2025[12, 18] - The weighted average GAAP yield for the quarter, based on amortized cost, was 155% on the total CLO portfolio[12] Portfolio Composition - CLO debt investments totaled $1855 million, with 77% in the U S and 23% in Europe[12] - CLO equity investments totaled $1940 million, with 95% in the U S and 5% in Europe[12] - The underlying loan portfolio is primarily composed of first lien, floating-rate leveraged loans, representing approximately 97% of the assets[22] - The CLO portfolio's underlying loans have a weighted average maturity of 42 years and a weighted average loan facility size of $16 billion[21, 23] Market Trends - U S CLO BBB Tranche Spread was 260, a decrease of 25 from the previous quarter[11] - U S CLO Issuance was $1596 billion, an increase of $646 billion from the previous quarter[11] - U S Trailing-Twelve-Month Default Rate was 139%, an increase of 028% from the previous quarter[11]

Core Insights - 2025 presents a favorable environment for mortgage REITs due to the Federal Reserve's policy normalization, which is expected to lower funding costs for short-term financing [1] Group 1: Market Conditions - The Federal Reserve is advancing its policy normalization, which is beneficial for mortgage REITs [1] - Lower funding costs on short-term financing are anticipated as a result of the Fed's actions [1] Group 2: Investment Approach - The investment strategy focuses on a fundamental long-term perspective, particularly in REITs, preferred stocks, and high-yield bonds [1] - The approach includes combining long stock positions with covered calls and cash secured puts [1]

Core Viewpoint - Annaly Capital offers a high dividend yield of 12.9%, significantly higher than the S&P 500's yield of approximately 1.2%, but this does not guarantee a stable income stream for investors [2][8]. Company Overview - Annaly Capital operates as a mortgage REIT, which is distinct from traditional REITs that own physical properties. Instead, it invests in pooled mortgages that are converted into bond-like securities [3][4]. - The value of Annaly's business is primarily derived from the mortgage securities it holds, similar to a mutual fund, and it reports its tangible book value quarterly [5]. Dividend Characteristics - Annaly's dividend payments are highly variable and consist of both interest and principal repayment, leading to a gradual decline in the company's value over time [7][8]. - The company's dividend history shows significant volatility, indicating that it may not be suitable for investors seeking consistent and reliable income [8][12]. Investment Perspective - For total return-focused investors, Annaly may enhance portfolio diversification, as its long-term total return has kept pace with the S&P 500, despite differing stock performance [10][11]. - However, for dividend investors, Annaly may not meet expectations for a reliable and growing dividend, and spending dividends rather than reinvesting them could lead to disappointment [12].