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Here's How to Play Annaly Stock as Mortgage Rates Continue to Decline
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Key Takeaways
Falling mortgage rates and Fed cuts will drive Annaly's net interest income and strengthen its book value.
Annaly holds a $89.5B diversified portfolio with Agency MBS, MSR, and residential credit.
NLY supports investors with $7.4B liquidity, a 12.9% dividend yield, and a $1.5B buyback plan.
Annaly Capital Management’s (NLY - Free Report) performance and prospects are significantly influenced by the mortgage rates. Mortgage rates continue to ease and have declined to the lowest level of 2025. According to Freddie Mac, the average 30-year fixed mortgage rate fell to 6.26% as of Sept. 17, down from 6.43% the previous week and 6.91% at the start of 2025.
Housing affordability challenges are declining 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 this turnaround, mortgage originations and refinancing index are witnessing a positive trend. This will likely reduce operational and financial challenges for mREITs like NLY, AGNC Investment Corporation (AGNC - Free Report) , and Starwood Property Trust, Inc. (STWD - Free Report) , and increase the gain on sale margin and new investment activity.
Also, the Federal Reserve cut its benchmark interest rate by 25 basis points on Sept. 17, 2025, to 4.00-4.25% and signaled the possibility of two additional reductions by year-end. Lower rates will further boost NLY’s net interest income (NII) in the upcoming period. In the first half of 2025. NII increased to $493.2 million compared with $47.1 million in the same period a year ago.
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, supporting Annaly’s financials in the upcoming period.
Given such positive developments, many investors must be wondering how to play NLY stock. Now, to answer this, it’s essential to delve into the details and evaluate various factors at play.
NLY to Benefit From Portfolio Diversification
Annaly’s diversified investment strategy remains a cornerstone of its long-term resilience. The company’s portfolio spans Agency mortgage-backed securities (MBS), residential credit, and mortgage servicing rights (MSR). As of June 30, 2025, the portfolio aggregated $89.5 billion, of which $79.5 billion consisted of highly liquid Agency MBS with actual or implied AAA ratings.
This multi-asset approach enhances the company’s ability to withstand shifting interest-rate and macroeconomic conditions. The MSR portfolio complements Annaly’s Agency MBS strategy by offering an attractive yield while providing a hedge to mortgage basis volatility and slower prepayment speeds. This hedging impact may produce more consistent returns over time and enable Annaly to perform well in a scenario of interest rate change.
The company’s emphasis on residential credit further supports consistent returns across diverse economic scenarios. Since 2021-2022, Annaly has sharpened its focus on core housing finance operations by exiting the commercial real estate and Middle Market Lending businesses. This streamlined strategy enables more targeted capital deployment and improved risk management.
Hence, by maintaining this diversified exposure, Annaly is positioned to capitalize on opportunities across housing finance while limiting concentration risk. This approach supports the company’s ability to deliver stable returns throughout different market cycles.
NLY’s Strong Liquidity Position Aids Capital Distribution
Annaly has maintained a solid liquidity position. As of June 30, 2025, Annaly had $7.4 billion of total assets available for financing, including $4.7 billion in cash and unencumbered Agency MBS.
The company has a record of paying monthly dividends, currently yielding a staggering 12.9% compared with the industry’s 12%.
Dividend Yield
Image Source: Zacks Investment Research
Notably, the dividend yield of its peers, AGNC Investment and Starwood Property Trust, are 14.1% and 9.5%, respectively.
Coming back to NLY, besides dividends, it has a $1.5 billion share repurchase program, authorized in December 2024 and effective through Dec. 1, 2029, which reinforces its long-term commitment to enhancing shareholder value. 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’s Price Performance & Valuation
Shares of Annaly have gained 18.6% year to date compared with the industry's growth of 5.9%. Meanwhile, shares of its peers, AGNC and STWD, have returned 9.7% and 7.1%, respectively, during the same time frame.
Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Annaly appears expensive relative to the industry. It is currently trading at a premium with a forward 12-month price-to-tangible book (P/TB) multiple of 1.13X, higher than the industry average of 1.08X. The company peers, AGNC Investment and Starwood Property Trust, hold forward 12-month P/TB of 1.26X and 1.07X, respectively.
Price-to-Tangible Book TTM
Image Source: Zacks Investment Research
How to Approach Annaly Stock Now?
The company’s fundamentals remain broadly supportive, underpinned by its diversified portfolio mix, solid liquidity buffer, and a disciplined shareholder return framework. The company continues to derive stability from its large Agency MBS allocation, while its MSR and residential credit segments enhance yield opportunities and provide hedges against interest-rate volatility. With the Federal Reserve shifting toward an easing cycle and mortgage rates trending lower, its financials are expected to improve further.
The Zacks Consensus Estimate for Annaly’s 2025 and 2026 sales implies year-over-year growth of 463.4% and 29.2%, respectively.
Sales Estimates
Image Source: Zacks Investment Research
Further, the Zacks Consensus Estimate for 2025 and 2026 earnings implies year-over-year growth of 7.0% and 2.5%, respectively.
Earnings Estimates
Image Source: Zacks Investment Research
However, any volatility in the mortgage market, unfavorable changes in the shape of the yield curve, interest-rate volatility, and deterioration of the generic financial conditions may affect the performance of the company's investments. Further, though the Fed rate cuts are likely to be advantageous for the company in the long term, the immediate impact on its performance might not reflect a significant change.
Also, from a valuation standpoint, NLY appears expensive relative to the industry.
As such, prospective investors might consider waiting for a more attractive entry point. However, existing shareholders may consider holding NLY for its income-generating potential and long-term stability.
Image: Bigstock
Here's How to Play Annaly Stock as Mortgage Rates Continue to Decline
Key Takeaways
Annaly Capital Management’s (NLY - Free Report) performance and prospects are significantly influenced by the mortgage rates. Mortgage rates continue to ease and have declined to the lowest level of 2025. According to Freddie Mac, the average 30-year fixed mortgage rate fell to 6.26% as of Sept. 17, down from 6.43% the previous week and 6.91% at the start of 2025.
Housing affordability challenges are declining 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 this turnaround, mortgage originations and refinancing index are witnessing a positive trend. This will likely reduce operational and financial challenges for mREITs like NLY, AGNC Investment Corporation (AGNC - Free Report) , and Starwood Property Trust, Inc. (STWD - Free Report) , and increase the gain on sale margin and new investment activity.
Also, the Federal Reserve cut its benchmark interest rate by 25 basis points on Sept. 17, 2025, to 4.00-4.25% and signaled the possibility of two additional reductions by year-end. Lower rates will further boost NLY’s net interest income (NII) in the upcoming period. In the first half of 2025. NII increased to $493.2 million compared with $47.1 million in the same period a year ago.
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, supporting Annaly’s financials in the upcoming period.
Given such positive developments, many investors must be wondering how to play NLY stock. Now, to answer this, it’s essential to delve into the details and evaluate various factors at play.
NLY to Benefit From Portfolio Diversification
Annaly’s diversified investment strategy remains a cornerstone of its long-term resilience. The company’s portfolio spans Agency mortgage-backed securities (MBS), residential credit, and mortgage servicing rights (MSR). As of June 30, 2025, the portfolio aggregated $89.5 billion, of which $79.5 billion consisted of highly liquid Agency MBS with actual or implied AAA ratings.
This multi-asset approach enhances the company’s ability to withstand shifting interest-rate and macroeconomic conditions. The MSR portfolio complements Annaly’s Agency MBS strategy by offering an attractive yield while providing a hedge to mortgage basis volatility and slower prepayment speeds. This hedging impact may produce more consistent returns over time and enable Annaly to perform well in a scenario of interest rate change.
The company’s emphasis on residential credit further supports consistent returns across diverse economic scenarios. Since 2021-2022, Annaly has sharpened its focus on core housing finance operations by exiting the commercial real estate and Middle Market Lending businesses. This streamlined strategy enables more targeted capital deployment and improved risk management.
Hence, by maintaining this diversified exposure, Annaly is positioned to capitalize on opportunities across housing finance while limiting concentration risk. This approach supports the company’s ability to deliver stable returns throughout different market cycles.
NLY’s Strong Liquidity Position Aids Capital Distribution
Annaly has maintained a solid liquidity position. As of June 30, 2025, Annaly had $7.4 billion of total assets available for financing, including $4.7 billion in cash and unencumbered Agency MBS.
The company has a record of paying monthly dividends, currently yielding a staggering 12.9% compared with the industry’s 12%.
Dividend Yield
Image Source: Zacks Investment Research
Notably, the dividend yield of its peers, AGNC Investment and Starwood Property Trust, are 14.1% and 9.5%, respectively.
Coming back to NLY, besides dividends, it has a $1.5 billion share repurchase program, authorized in December 2024 and effective through Dec. 1, 2029, which reinforces its long-term commitment to enhancing shareholder value. 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’s Price Performance & Valuation
Shares of Annaly have gained 18.6% year to date compared with the industry's growth of 5.9%. Meanwhile, shares of its peers, AGNC and STWD, have returned 9.7% and 7.1%, respectively, during the same time frame.
Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Annaly appears expensive relative to the industry. It is currently trading at a premium with a forward 12-month price-to-tangible book (P/TB) multiple of 1.13X, higher than the industry average of 1.08X. The company peers, AGNC Investment and Starwood Property Trust, hold forward 12-month P/TB of 1.26X and 1.07X, respectively.
Price-to-Tangible Book TTM
Image Source: Zacks Investment Research
How to Approach Annaly Stock Now?
The company’s fundamentals remain broadly supportive, underpinned by its diversified portfolio mix, solid liquidity buffer, and a disciplined shareholder return framework. The company continues to derive stability from its large Agency MBS allocation, while its MSR and residential credit segments enhance yield opportunities and provide hedges against interest-rate volatility. With the Federal Reserve shifting toward an easing cycle and mortgage rates trending lower, its financials are expected to improve further.
The Zacks Consensus Estimate for Annaly’s 2025 and 2026 sales implies year-over-year growth of 463.4% and 29.2%, respectively.
Sales Estimates
Image Source: Zacks Investment Research
Further, the Zacks Consensus Estimate for 2025 and 2026 earnings implies year-over-year growth of 7.0% and 2.5%, respectively.
Earnings Estimates
Image Source: Zacks Investment Research
However, any volatility in the mortgage market, unfavorable changes in the shape of the yield curve, interest-rate volatility, and deterioration of the generic financial conditions may affect the performance of the company's investments. Further, though the Fed rate cuts are likely to be advantageous for the company in the long term, the immediate impact on its performance might not reflect a significant change.
Also, from a valuation standpoint, NLY appears expensive relative to the industry.
As such, prospective investors might consider waiting for a more attractive entry point. However, existing shareholders may consider holding NLY for its income-generating potential and long-term stability.
Annaly currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.