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Annaly Capital Management, Inc. Message Board

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  • tomyris2001 tomyris2001 Aug 20, 2007 5:07 PM Flag

    What is happening here?

    I see you did not get a very satisfactory reponse to your question aboubt what moves this stock , this May article from Barrons , makes a good stab at explaining it . As for what moves a stock on any one day, lets not waste our time trying to figure that one out .I like you got sucked into the high dividend back in 2004 , but having gone through the pain cycle I am sticking around for the upswing and have doubled my bet .

    MONDAY, MAY 14, 2007

    Annaly's Opportunity

    THE FEDERAL RESERVE HAS BEEN no friend to Annaly Capital Management in recent years, but that could change if the economy continues to weaken in 2007, spurring the central bank to lower interest rates. Annaly, a Manhattan-based real-estate investment trust, borrows funds at short-term rates and reinvests them in mortgage-backed securities sold by the likes of Fannie Mae (ticker: FNM) and Freddie Mac (FRE). It earns the difference, or spread, between the income generated by its portfolio and its cost of capital, and pays out about 90% of its earnings in the form of dividends.

    Alas, that spread is only 0.58 of a percentage point these days, following the Fed's three-year campaign to tighten credit, which has boosted the short-term federal-funds rate to 5.25% from 1%. With rates on long-dated Treasuries relatively unchanged, the yield curve has flattened or inverted for much of the past year.

    Mortgage yields don't mimic the Treasury market precisely, but the difference is negligible in terms of the damage done: Annaly earned only 44 cents a share last year, down from a record $2.67 in 2002. Its dividend fell to 57 cents a share, compared with a payout of $2.67 in 2002, and its shares dropped to 15 from 21. Annaly recently traded at 15.86.

    Some savvy investors now think the worst is over. "The yield curve will start to steepen in the second half of the year and continue to do so in '08 as the economy begins to slow and the Fed cuts rates," says Arnie Schneider, chief investment officer of Schneider Capital Management, which has owned shares for about a year. "If the federal- funds rate decreases by one percentage point, [the company] could probably earn close to $2."

10.42+0.050(+0.48%)Apr 29 4:05 PMEDT