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Annaly Stock Gains 8% in 6 Months: Is It Worth Holding for Now?
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Over the past six months, Annaly Capital Management (NLY - Free Report) shares have gained 8% compared with the industry’s rise of 1.7%.
Price Performance
Image Source: Zacks Investment Research
NLY has also outperformed its peers AGNC Investment (AGNC - Free Report) and Arbor Realty Trust (ABR - Free Report) over the same time frame. AGNC Investment has grown 5.7%, while Arbor Realty has fallen 20.9%.
Annaly is a mortgage real estate investment trust that primarily owns, manages and finances a portfolio of real estate-related investment securities. The company's diversified approach to capital allocation has been crucial in its ability to navigate market fluctuations and maintain a competitive edge.
Let us delve deeper and analyze other factors to find out the NLY stock’s investment worthiness.
Annaly to Gain From Decline in Mortgage Rates
The Federal Reserve has lowered the interest rates by 100 basis points in 2024 and has kept rates steady since then. As such, mortgage rates are witnessing a slight decline. Per a Freddie Mac report, the average rate on a 30-year fixed-rate mortgage was 6.84% as of June 12, 2025, down from 6.95% in the same week a year ago.
Housing affordability challenges are expected to decline with lower mortgage rates. With rates trending lower and balanced supply/affordability playing out in the mortgage market, loan demand is witnessing an increase.
With improving purchase originations and refinancing activities, NLY will likely witness book value improvement in the coming period as spreads in the Agency market tighten, driving asset prices. This should also boost net interest spread, improving the portfolio's overall yield. This is expected to support Annaly’s financials in the upcoming period.
Strong Dividend Profile
Annaly has a record of paying monthly dividends, currently yielding a staggering 14.7% compared with the industry’s 11.7%. It currently sits at a payout ratio of 101%.
The company recently hiked its dividend for the first time in the past five years. On March 13, 2025, Annaly announced a cash dividend of 70 cents per share for the first quarter of 2025, marking a 7.7% hike from the prior payout. This move reflects confidence in NLY’s cash flow and growth prospects.
Annaly peer AGNC Investment and Arbor Realty Trust also pay out quarterly dividends. AGNC Investment has a dividend yield of 15.6%, whereas Arbor Realty Trust has a dividend yield of 11.7%.
Coming back to Annaly, it is focused on improving its liquidity and reducing leverage to support capital distribution activities. Till the end of the first quarter of 2025, the company had $7.5 billion of total assets available for financing, including cash and unencumbered Agency MBS of $4.7 billion, which can readily provide liquidity in times of adverse market conditions. This provides a substantial competitive edge in today's market.
On Dec. 31, 2024, the company’s board of directors authorized a common share repurchase program, which will expire on Dec. 31, 2029. Under the program, the company may repurchase up to $1.5 billion of its outstanding shares of common stock. Though the company has not repurchased shares under this plan since it was announced, its solid liquidity position will support its capital distribution in the future.
NLY to Benefit From Portfolio Diversification
One of Annaly's main advantages is its well-diversified capital allocation approach. The company's investment portfolio includes residential credit, mortgage servicing rights (MSR), and agency mortgage-backed securities (MBS). This comprehensive strategy aims to lower volatility and sensitivity to interest rate changes while simultaneously generating appealing risk-adjusted returns. As of March 31, 2025, its investment portfolio aggregated $84.9 billion.
Annaly's diversified investment strategy will likely be a key contributor to long-term growth and stability. By diversifying its investments across the mortgage market, the company is better positioned to capitalize on opportunities as they occur in multiple areas while limiting the risks associated with overexposure to any particular location.
In sync with this, in 2022, NLY sold its Middle Market Lending portfolio and exited its commercial real estate business. Through these, the company was able to enhance capabilities across its core housing finance strategy and allocate capital to residential credit businesses, the MSR platform and Agency MBS.
Annaly is also focusing on improving its capabilities by acquiring newly originated MSRs from its partner network, which will continue to provide a strong advantage in expanding its MSR business.
The inclusion of MSRs in the portfolio is also notable because these assets tend to increase in value as interest rates rise, offsetting reductions in the value of agency MBS. This hedging impact may produce more consistent returns over time and enable Annaly to perform well in a scenario of interest rate change.
Annaly Stock’s Valuation Analysis
From a valuation standpoint, NLY appears expensive relative to the industry. The company is currently trading at a premium with a forward 12-month price-to-tangible book (P/TB) TTM multiple of 0.98X, higher than the industry average of 0.96X.
Price-to-Tangible Book TTM
Image Source: Zacks Investment Research
Annaly peer AGNC Investment and Arbor Realty Trust forward 12-month price-to-tangible book of 0.88X and 1.08X, respectively.
How to Approach NLY Stock Now?
Though the macro environment remains uncertain with elevated volatility, which may impact NLY’s performance adversely, its strong liquidity position allows the company to maintain its dividend policy and take advantage of market difficulties to acquire assets at attractive valuations. Also, Annaly’s diversified investment strategy can be a key contributor to long-term growth and stability, supporting its financials.
With analysts revising earnings estimates upward over the past 60 days, sentiment around the stock remains constructive.
Estimates Revision Trend
Image Source: Zacks Investment Research
As such, existing shareholders may consider holding on to NLY for its income-generating potential and long-term stability. However, new investors may benefit from waiting for a more attractive entry point, given the stock’s current premium valuation.
Image: Bigstock
Annaly Stock Gains 8% in 6 Months: Is It Worth Holding for Now?
Over the past six months, Annaly Capital Management (NLY - Free Report) shares have gained 8% compared with the industry’s rise of 1.7%.
Price Performance
NLY has also outperformed its peers AGNC Investment (AGNC - Free Report) and Arbor Realty Trust (ABR - Free Report) over the same time frame. AGNC Investment has grown 5.7%, while Arbor Realty has fallen 20.9%.
Annaly is a mortgage real estate investment trust that primarily owns, manages and finances a portfolio of real estate-related investment securities. The company's diversified approach to capital allocation has been crucial in its ability to navigate market fluctuations and maintain a competitive edge.
Let us delve deeper and analyze other factors to find out the NLY stock’s investment worthiness.
Annaly to Gain From Decline in Mortgage Rates
The Federal Reserve has lowered the interest rates by 100 basis points in 2024 and has kept rates steady since then. As such, mortgage rates are witnessing a slight decline. Per a Freddie Mac report, the average rate on a 30-year fixed-rate mortgage was 6.84% as of June 12, 2025, down from 6.95% in the same week a year ago.
Housing affordability challenges are expected to decline with lower mortgage rates. With rates trending lower and balanced supply/affordability playing out in the mortgage market, loan demand is witnessing an increase.
With improving purchase originations and refinancing activities, NLY will likely witness book value improvement in the coming period as spreads in the Agency market tighten, driving asset prices. This should also boost net interest spread, improving the portfolio's overall yield. This is expected to support Annaly’s financials in the upcoming period.
Strong Dividend Profile
Annaly has a record of paying monthly dividends, currently yielding a staggering 14.7% compared with the industry’s 11.7%. It currently sits at a payout ratio of 101%.
The company recently hiked its dividend for the first time in the past five years. On March 13, 2025, Annaly announced a cash dividend of 70 cents per share for the first quarter of 2025, marking a 7.7% hike from the prior payout. This move reflects confidence in NLY’s cash flow and growth prospects.
Annaly peer AGNC Investment and Arbor Realty Trust also pay out quarterly dividends. AGNC Investment has a dividend yield of 15.6%, whereas Arbor Realty Trust has a dividend yield of 11.7%.
Coming back to Annaly, it is focused on improving its liquidity and reducing leverage to support capital distribution activities. Till the end of the first quarter of 2025, the company had $7.5 billion of total assets available for financing, including cash and unencumbered Agency MBS of $4.7 billion, which can readily provide liquidity in times of adverse market conditions. This provides a substantial competitive edge in today's market.
On Dec. 31, 2024, the company’s board of directors authorized a common share repurchase program, which will expire on Dec. 31, 2029. Under the program, the company may repurchase up to $1.5 billion of its outstanding shares of common stock. Though the company has not repurchased shares under this plan since it was announced, its solid liquidity position will support its capital distribution in the future.
NLY to Benefit From Portfolio Diversification
One of Annaly's main advantages is its well-diversified capital allocation approach. The company's investment portfolio includes residential credit, mortgage servicing rights (MSR), and agency mortgage-backed securities (MBS). This comprehensive strategy aims to lower volatility and sensitivity to interest rate changes while simultaneously generating appealing risk-adjusted returns. As of March 31, 2025, its investment portfolio aggregated $84.9 billion.
Annaly's diversified investment strategy will likely be a key contributor to long-term growth and stability. By diversifying its investments across the mortgage market, the company is better positioned to capitalize on opportunities as they occur in multiple areas while limiting the risks associated with overexposure to any particular location.
In sync with this, in 2022, NLY sold its Middle Market Lending portfolio and exited its commercial real estate business. Through these, the company was able to enhance capabilities across its core housing finance strategy and allocate capital to residential credit businesses, the MSR platform and Agency MBS.
Annaly is also focusing on improving its capabilities by acquiring newly originated MSRs from its partner network, which will continue to provide a strong advantage in expanding its MSR business.
The inclusion of MSRs in the portfolio is also notable because these assets tend to increase in value as interest rates rise, offsetting reductions in the value of agency MBS. This hedging impact may produce more consistent returns over time and enable Annaly to perform well in a scenario of interest rate change.
Annaly Stock’s Valuation Analysis
From a valuation standpoint, NLY appears expensive relative to the industry. The company is currently trading at a premium with a forward 12-month price-to-tangible book (P/TB) TTM multiple of 0.98X, higher than the industry average of 0.96X.
Price-to-Tangible Book TTM
Image Source: Zacks Investment Research
Annaly peer AGNC Investment and Arbor Realty Trust forward 12-month price-to-tangible book of 0.88X and 1.08X, respectively.
How to Approach NLY Stock Now?
Though the macro environment remains uncertain with elevated volatility, which may impact NLY’s performance adversely, its strong liquidity position allows the company to maintain its dividend policy and take advantage of market difficulties to acquire assets at attractive valuations. Also, Annaly’s diversified investment strategy can be a key contributor to long-term growth and stability, supporting its financials.
With analysts revising earnings estimates upward over the past 60 days, sentiment around the stock remains constructive.
Estimates Revision Trend
Image Source: Zacks Investment Research
As such, existing shareholders may consider holding on to NLY for its income-generating potential and long-term stability. However, new investors may benefit from waiting for a more attractive entry point, given the stock’s current premium valuation.
The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.