The concern for NLY for me is that their P/E doubled from Q2 and their payout ratio is well over 100%. Glad I got out of it at $16.50. I will get back into it if it drops to the low 15s. Otherwise, I'm definitely sticking with the winning horse and that's AGNC which I believe will see at least $29 by December. GTLA...
Underperforming is a subjective term, especially when no time frame is referenced.
That said, NLY is being extremely conservative right now.
1) It's carrying the lowest leverage in its history
2) It has $3.5 billion in cash equivalents waiting for fruit to drop in its basket. Cash returns at today's levels are most certainly a drag on short term performance.
3) It has consistently hedged a high proportion of its assets. Hedges cost.
So take a deep breath and relax about "underperformance"
As Mr Farrell said today NLY has returned over 600% to its holders since going public (majority in cold hard cash) while the S&P has returned 8% TOTAL!!
Excellent post. One other thing that Farrell said in the CC was that they're not managing for the next quarter, but for the next 25 years. This picture of their performance since inception is worth a thousand words:
Agnc has about 90 cents of undistributed income that must be distributed by next June or the Company will pay a federal tax on it. IMO this pretty much ensures that they will be able to keep their $1.40 dividend for several more quarters. NLY doesn't have the same cushion.