Annaly Capital Management (NYSE:NLY) Q4 2025 Earnings call January 29, 2026 09:00 AM ET Company ParticipantsBose George - Managing DirectorDavid Finkelstein - CEO and Co-Chief Investment OfficerEric Hagen - Managing DirectorKen Adler - Head of Mortgage Servicing RightsSean Kensil - Director of Investor RelationsSerena Wolfe - CFOTrevor Cranston - Managing DirectorVankeepuram Srinivasan - Head of AgencyConference Call ParticipantsDoug Harter - Equity Research AnalystHarsh Hemnani - AnalystJason Stewart - Ana ...

Anyone who has followed us knows that we cover the mREIT sector. While mortgage REITs carry relatively high risk, we also cover the preferred shares in the sector. Preferred shares offer investors a great way to buy into the sector at materially less risk. One of the perks of preferred shares in this space is that they have a relatively high dividend yield. Dynex Capital (DX) Preferred Share We find that DX-C (DX.PR.C) offers a fairly appealing dividend rate. The REIT Forum The stripped yield is currently 9 ...

AGNC Investment Corp. ( AGNC ) managed to grow its portfolio of MBS in the fourth quarter and delivered high single-digit growth in its tangible book value compared to the year-earlier period. If federal fundAnalyst’s Disclosure: I/we have a beneficial long position in the shares of AGNC, NLY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business r ...

Core Insights - The current economic environment in 2026 necessitates a more nuanced approach to housing investment, focusing on risk management, cash accessibility, and long-term financial goals rather than a simple rent vs. buy debate [1][27] Housing Market Overview - Home prices in the U.S. remain high relative to incomes, and mortgage interest rates have increased significantly since the pandemic, altering family perspectives on home buying [2] - Despite these challenges, housing continues to be a critical avenue for wealth accumulation and a reliable long-term asset [2] Investment Strategies - Investors are encouraged to consider whether to invest in housing through mortgage REITs or by paying down their own home mortgage, as both options are influenced by the housing economy but differ in risk and returns [3][6] - A monthly contribution of $1,500 is used as a benchmark for comparing these two investment paths, leading to a total contribution of $180,000 over ten years [5] Path One: Mortgage REITs - Mortgage REITs allow investment in the financing side of housing, focusing on mortgages and mortgage-backed securities rather than physical properties [7][8] - Investing in mortgage REITs offers liquidity, diversification, and regular income through dividends, but is sensitive to interest rate changes and economic downturns [9][10] - Historical returns for mortgage REITs range from 6% to 10% annually, with a conservative estimate suggesting a portfolio value of approximately $245,000 to $260,000 after ten years with consistent investment and reinvestment of dividends [11][12] Path Two: Home Equity - Home equity grows through mortgage repayment, property value appreciation, and inflation effects, leveraging borrowed money to control a larger asset [15][18] - A typical scenario involves purchasing a $400,000 home with a 10% down payment, leading to an estimated home equity of about $225,000 after ten years, assuming a 3% annual appreciation rate [19] - Homeownership entails hidden costs such as maintenance, taxes, and insurance, which can diminish overall returns [20] Comparative Analysis - After ten years, both investment paths yield similar financial outcomes, with mortgage REITs potentially offering higher nominal cash balances due to uninterrupted compounding, while home equity benefits from leverage and inflation hedging [22] - The key difference lies in the nature of risk; mortgage REITs exhibit daily volatility, while home value fluctuations are less apparent until a sale or refinance occurs [23] Investor Suitability - Mortgage REITs are suited for investors seeking flexibility and diversification, comfortable with market volatility [25] - Home equity is ideal for those planning to stay in one location long-term, willing to accept higher initial costs and illiquidity for the benefits of leverage and forced savings [26] Conclusion - Consistent investment in the housing sector can be structured through various strategies, each aligning with different risk tolerances and financial goals, emphasizing the importance of method selection in accessing the housing market [27]

Core Viewpoint - Dynex Capital, Inc. has seen an increase in its consensus price target from $14.95 to $18, indicating growing optimism among analysts regarding the company's future performance, although some analysts maintain a more cautious outlook [2][6]. Company Overview - Dynex Capital, Inc. is a mortgage real estate investment trust (REIT) that specializes in mortgage-backed securities (MBS) in the United States, with a portfolio that includes both agency and non-agency MBS, as well as CMBS interest-only securities [1]. Financial Performance - The company's financial performance, particularly its earnings reports, significantly influences analysts' price targets, with positive earnings surprises potentially leading to upward revisions [3][6]. - Dynex Capital's performance is sensitive to changes in interest rates, which can impact its net interest margin, prompting analysts to adjust price targets based on interest rate expectations [3]. Market Influences - The broader real estate and mortgage markets, including changes in housing demand, mortgage rates, and government policies related to housing finance, can affect Dynex Capital's outlook [4]. - As a REIT, Dynex Capital is required to distribute at least 90% of its taxable income to shareholders, making its dividend policy and yield important factors for analysts when setting price targets [4]. Comparative Analysis - In comparison to Angel Oak Mortgage REIT, Dynex Capital is noted for its volatility and risk profile, emphasizing the importance of considering risk factors when evaluating the company's stock [5].

Core Viewpoint - Two Harbors Investment Corp. CAL 30 (TWOD) is identified as a baby bond from the mortgage REIT (mREIT) Two Harbors (TWO) [1] Group 1: Company Overview - Two Harbors Investment Corp. operates in the mortgage REIT sector, focusing on providing returns through capital markets instruments [1] - The company has been covered previously, indicating ongoing interest and analysis in its financial instruments [1] Group 2: Investment Strategy - Binary Tree Analytics (BTA) aims to deliver high annualized returns with a low volatility profile, focusing on closed-end funds (CEFs), exchange-traded funds (ETFs), and special situations [1] - BTA has over 20 years of investment experience, emphasizing a strong background in finance [1]

Core Insights - The Global X SuperDividend ETF (SDIV) offers a high dividend yield of 9.7%, significantly higher than the Vanguard High Dividend Yield ETF (2.5%) and Schwab U.S. Dividend Equity ETF (3.7%) [1] - SDIV's high yield is primarily derived from its holdings in mortgage REITs and international stocks, but this comes with sustainability concerns due to high payout ratios [2][3] Group 1: Yield and Performance - SDIV's yield is more than triple that of VYM and over double that of SCHD, tracking 100 of the highest-yielding equities globally [1] - The fund has a high expense ratio of 0.58%, nearly ten times that of its peers, and a portfolio turnover rate of 93%, indicating frequent trading [2] Group 2: Dividend Sustainability - The monthly dividend has decreased from $0.255 in early 2023 to $0.19, marking a 25% reduction, which highlights structural challenges within the fund [2] - Key holdings like Annaly Capital Management, AGNC Investment, and Invesco Mortgage Capital exhibit unsustainable payout ratios, with Annaly at 122%, AGNC at 215%, and Invesco at 296% [3][4] Group 3: Alternative Options - For investors seeking more sustainable income, the JPMorgan Equity Premium Income ETF (JEPI) offers an 8.2% yield through a covered call strategy, with a more manageable payout ratio of 61% [6][7] - JEPI's monthly distributions have been more consistent compared to SDIV, providing better downside protection without the risks associated with emerging markets [7]

Core Insights - The article discusses the anticipated economic environment in 2026, highlighting expected interest rate cuts and the impact on various sectors, particularly mortgage REITs and pharmaceutical companies. Group 1: Interest Rates and Mortgage REITs - Interest rates are projected to decline, with Fed Chair Jay Powell having already implemented two rate cuts, and more expected under Kevin Hassett's leadership [3][4] - Mortgage REITs like Annaly Capital (NLY) and Dynex Capital (DX) are well-positioned to benefit from falling rates, with yields of 12.3% and 14.7% respectively, and potential for significant price appreciation [4][5] - The easing of mortgage spreads, which are crucial for profitability, indicates a favorable environment for these mortgage REITs as they hold government-backed securities [5][6] Group 2: Pharmaceutical Industry and AI - The pharmaceutical industry is set to experience accelerated drug discovery cycles, potentially reducing the time from development to market from 10-15 years to 3-6 years due to AI advancements [7][8] - Companies like BlackRock Health Sciences Term Trust (BMEZ) are positioned to benefit from this trend, yielding 8.6% while investing in innovative drug development firms [9] - Danaher (DHR) is highlighted as a key supplier in the life sciences sector, providing essential tools and consumables for drug development, which are expected to see increased demand due to AI-driven research [11][12] Group 3: Consumer Goods - Hershey Foods - Hershey Foods (HSY) is noted for its strong brand portfolio and resilience despite rising cocoa prices, with management implementing efficiency plans and price increases to maintain cash flow [14][15] - The company has raised its dividend by 70% over five years, indicating a strong commitment to shareholder returns and positioning for a rebound as input costs stabilize [15]

Core Insights - The article discusses the anticipated decline in interest rates and its implications for mortgage REITs like Annaly Capital and Dynex Capital, which are well-positioned to benefit from falling rates and currently offer high dividend yields of 12.3% and 14.7% respectively [1] - The introduction of "Applied AI" in drug discovery is expected to significantly shorten the time required to bring new drugs to market, potentially reducing the cycle from 10-15 years to 3-6 years, which will enhance profitability for pharmaceutical companies [1] - Danaher is highlighted as a key player in the life sciences sector, providing essential tools and consumables for drug development, benefiting from increased R&D activities driven by AI advancements [1][2] - Hershey Foods is noted for its strong brand portfolio and recent operational efficiencies, positioning it for a rebound after a period of margin compression due to rising cocoa prices [2] Mortgage REITs - Annaly Capital and Dynex Capital are expected to thrive as interest rates decline, with their portfolios consisting of government-backed mortgages that appreciate in value as rates fall [1] - The mortgage spreads, which are crucial for profitability, have been easing, creating favorable conditions for these mortgage REITs [1] Pharmaceutical Industry - The integration of AI in drug discovery is projected to compress development timelines, allowing companies to monetize successful drugs more quickly and extend their monopoly pricing periods [1] - BlackRock Health Sciences Term Trust is mentioned as a vehicle for investing in innovative drug development companies, offering an 8.6% yield [1] Life Sciences Sector - Danaher is positioned to benefit from increased demand for laboratory tools and consumables as pharmaceutical companies ramp up R&D efforts, driven by AI [1][2] - The company avoids the political challenges faced by drug manufacturers, focusing instead on providing essential support for drug development [1] Consumer Goods - Hershey Foods has implemented a two-year efficiency plan and raised prices, which has helped it maintain cash flow despite rising input costs [2] - The company has increased its dividend by 70% over five years, indicating strong shareholder returns and potential for future growth [2]

Core Insights - Sunrise Realty Trust, Inc. reported a GAAP net income of $4.05 million or $0.30 per basic weighted average common share for Q3 2025, with Distributable Earnings of $4.12 million or $0.31 per share [1][2]. Financial Performance - The company paid a cash dividend of $0.30 per common share on October 15, 2025, distributing a total of $4.0 million in dividends, which is slightly lower than the Distributable Earnings of $0.31 per share for the same period [4]. - The reconciliation of GAAP net income to Distributable Earnings shows that for the three months ended September 30, 2025, the Distributable Earnings amounted to $4.12 million, reflecting adjustments for stock-based compensation and expected credit losses [16][18]. Strategic Focus - The CEO emphasized the company's commitment to its strategic objectives established 18 months ago, focusing on originating loans for transitional real estate assets primarily in the Southern United States [3]. - The company aims to diversify its portfolio across various asset classes, geographies, and borrowers while maintaining a consistent and stable dividend [3]. Company Overview - Sunrise Realty Trust, Inc. operates as an institutional commercial real estate lender, providing flexible financing solutions for commercial real estate projects, particularly in the Southern U.S. [8]. - The company is part of the Tannenbaum Capital Group's real estate platform, which includes affiliated debt funds focused on transitional commercial real estate properties [10].