repurchasing shares may allow Annaly to maintain its dividend by reducing the number of shares to which it must pay out. Not only will this purchases create additional demand for Annaly's shares, but also each share of NLY that NLY acquires becomes treasury stock that is not eligible for a dividend. With Annaly paying nearly 13%, repurchasing $1.5 billion in equity would mean that maintaining the dividend for one year would decrease the total payout to shareholders by $195 million. This means that even if Annaly earned less income in the future due to continuing spread narrowing, its yield could stay the same or even increase.
In all, NLY investors should be happy with this decision by NLY management. This plan should immediately result in some share price appreciation, while simultaneously reducing agency RMBS related risks to shareholders and also adding stability to the dividend.