"Lower Leverage Cushions Book Value Decline;
Still See Risk to the Dividend
Maintain Neutral: We are reinstating coverage of Annaly with a Neutral rating
and a $14 target (from $15). The combination of Annaly’s relatively low leverage
and the recent CreXus acquisition has the company fairly well positioned to take
advantage of the current market and improve returns. However, despite this
improvement we do not see Annaly’s returns on equity reaching double digits.
This level of return remains below the current dividend level and as a result we
see potential for further risk to the dividend."
Ford Equity Resarch
Ford's Strong Buy recommendation on Annaly Capital Management Inc. is the result of our systematic analysis on three basic characteristics: earnings strength,
relative valuation, and recent stock price movement. The company has enjoyed a very positive trend in earnings per share over the past 5 quarters. However, while
recent estimates for the company have been lowered by analysts, NLY has posted better than expected results. Based on operating earnings yield, the company is
undervalued when compared to all of the companies we cover. Share price changes over the past year indicates that NLY will perform well over the near term.
"5.15b Stock Sales: Executives should be required to sell stock
through pre-announced 10b5-1 program sales or by providing a
minimUm 30-day advance notice of any stock sales. 10b5-1
program adoptions, amendments, terminations and transactions
should be disclosed immediately, and boards of companies using
10b5-1 plans should: (1) adopt policies covering plan practices, (2)
periodically monitor plan transactions and (3) ensure that company
policies discuss plan use in the context of guidelines or
requirements on equity hedging, holding and ownership.2"