You make some legitimate points. However, since 1998 NLY has returned just over 11% annually while the share price has declined about 40 cents. That time period includes two occasions when the yield curve inverted.
As recently as 2012, NLY traded right around book value. The share price has fallen to around 80% of book value because the market is demanding a 11.50% return as compensation for the risk of owning the shares. If the shares traded at book value now, then the dividend rate would be only 9.2%
The book value of the shares is $13.10; shareholders own $13.10 of mortgage securities for each share of NLY that they own. So the the dividend rate is actually 9.2% because that is what we are paid on the value of the shares we own. The shares sell at a 20% discount because the market believes our money is at risk. Maybe they should just sell our securities and mail us our $13.10. That would amount to more than 2.5 years of dividends. I would take the money now. We have to hope that the share price doesn't fall further, and that the dividend is not cut, so we will break even 2.5 years from now.
You might be right about the market looking forward. The share price has fallen about 10% and the shares have a 20% discount to book value. That dismal performance might be the market pricing in anticipated rate hikes before they happen.
It is true that NLY could buy back its own shares at a 20% discount. The shares represent a portion of the bond portfolio So buying the shares is like buying mortgage backed bonds at a 20% discount. Since they are in the business of holding and trading bonds, you might wonder why they don't do a buyback. The answer is simple, NLY management is paid 1% of assets under management through a separate management agreement. If management authorizes a share buyback, it would be good for shareholders, but bad for executive compensation. If fact, the shares would never sell off to this level of discount if management would act on behalf of shareholders and take advantage of the arbitrage.
Mr. T Boone Pickens is long oil, if he were short oil, he would be telling a different tale.
Heavy commercial exposure to oil field financing and heavy exposure to personal financing for oil field workers, discouraging general outlook for Canada's economy in light of falling commodity and oil prices. The bank seems to be doing everything OK but hard to make money in the current economy.
Whether they are making money or not, they cannot stop. They will continue until someone puts them out of their misery :).
The debt they hold is mostly agency stuff and is not subject to credit risk. That doesn't mean that this is a good investment, just that they do not own any bad debt.
There is no evidence that there is an investigation underway. Please show the math that gets you to your fair value calculation. Thanks.
The book value is shown at $4.61. That doesn't mean this is a good investment, just that the book value is $4.61.
You have done better than most with this stock. But even though you played it perfect you made no money. Think about it.............. when you play it perfect you should make a boatload.
You are probably right about the movement of oil prices. However, the value of oil company stocks and the price of oil will not bottom at the same time.
ARR has lagged most MREITS during 2014, 2013 and 2012. Management at this company is not very good. You would be smart to keep your money in your pocket.
I sold and took the loss. After dividends I lost about 20% on ARR, but going forward the risk to the share price is too big to stick around. ARR could drop another dollar in a couple months if interest rates even flinch, worse yet it could continue to fall until lights out. Sometimes you have to know when you are beat. ARR in a bad investment.
The share price has fallen $2.73 during the last year and they have paid out $1.37. That is a loss of $1.36. They will not call the shares back unless they go over $25 and that is about $7.50 higher than it is now. By the time 2044 comes around this company will have been long gone, and all you money as well. Please look for a better investment, the deck is stacked against you on this one.
I would chose almost anything else. The 4.5 cent dividend is insufficient for a stock with this much risk. The share price could fall 30% or more during the course of a month or two if interest rates start to twitch. It can happen so fast you will wonder what happened.
Many of the shares held by Vanguard, Black Rock, etc are held in index funds. Small cap index, REIT index, Financial Services Index.........Make no mistake, ARR is a very risky stock. During the last two years the dividend has not covered the fall in the share price and the dividend is too small to compensate for the risk going forward.