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How to Approach Annaly Stock With Easing Mortgage Rates?
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Key Takeaways
NLY benefits from falling mortgage rates, easing housing affordability and boosting loan demand.
Annaly's $97.8B portfolio spans Agency MBS, residential credit and MSR for diversified returns.
NLY raised its dividend 7.7% in March 2025 and holds $8.8B in liquidity to support growth and stability.
Annaly Capital Management’s (NLY - Free Report) performance and prospects are significantly influenced by the mortgage rates. Mortgage rates continue to ease. According to a Freddie Mac report, the average rate on a 30-year fixed-rate mortgage was 6.19% as of Dec. 4, 2025, down from last week, when it averaged 6.23%. A year ago, at this time, the rates averaged 6.69%.
Housing affordability challenges are declining with lower mortgage rates. With rates trending lower and a balanced supply/affordability playing out in the mortgage market, loan demand is increasing. With this turnaround, mortgage originations and refinancing activities 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 activities.
Also, the Federal Reserve cut its benchmark interest rates twice this year, and market participants are expecting a further rate cut this month. The relatively lower rates will ease the earnings pressure, supporting NLY’s net interest income (NII) growth.
Given such positive developments, many investors must be wondering how to play NLY stock. Now, to answer this, it is essential to delve into the details and evaluate various factors at play.
Other Factors Supporting Annaly Performance
Portfolio Diversification: NLY’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 Sept. 30, 2025, the portfolio aggregated $97.8 billion, of which $87.3 billion consisted of highly liquid Agency MBS with actual or implied AAA ratings.
NLY is enhancing its MSR platform through partnerships to strengthen scale and portfolio quality. In October 2025, the company entered a long-term subservicing and MSR purchase agreement with PennyMac Financial Services, leveraging PennyMac’s strong servicing infrastructure and recapture capabilities. The partnership expands Annaly’s servicing network and is expected to drive incremental cost control and operating flexibility, which, in turn, would result in potential long-term earnings accretion.
The company’s emphasis on residential credit further supports consistent returns across diverse economic scenarios. Over the past few years, 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.
Solid Liquidity: Annaly continues to prioritise liquidity and prudent leverage management to navigate market volatility effectively. As of Sept. 30, 2025, the company held $8.8 billion in total assets available for financing, including $5.9 billion in cash and unencumbered Agency MBS, providing ample liquidity during adverse market conditions. This decent liquid position equips Annaly to sustain its operations and capitalize on opportunities, even amid periods of economic stress and financial-market uncertainty, reinforcing its overall financial resilience.
Impressive Payout: NLY has demonstrated a continued focus on shareholder returns through disciplined capital management.
The company pays out regular dividends. In March 2025, NLY raised its cash dividend by 7.7% to 70 cents per share. Over the past five years, the company has raised its dividend once. Its current dividend yield stands at 12.3%. AGNC Investment and Starwood Property offer yields of 13.7% and 10.5%, respectively.
Besides dividends, it has a share repurchase plan. On Jan. 31, 2025, the company’s board approved a common share repurchase program, authorizing up to $1.5 billion in buybacks through Dec. 31, 2029. While no shares have been repurchased under this plan yet, the decent liquidity position will keep the capital distribution plan sustainable.
Reading the Signals: What NLY’s Latest Estimates Indicate
The Zacks Consensus Estimate for Annaly’s 2025 and 2026 sales implies year-over-year growth of 399.6% and 53.2%, respectively.
Sales Estimates
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NLY’s 2025 and 2026 earnings indicates year-over-year growth of 7.4% and 1.5%, respectively.
Earnings Estimates
Image Source: Zacks Investment Research
How to Play Annaly Stock Now?
Shares of Annaly have gained 14.7% in the past year against the industry's decline of 1.2%. Meanwhile, shares of its peer STWD have fallen 8.9%, while AGNC Investment has risen 8%, respectively.
Price Performance
Image Source: Zacks Investment Research
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 mortgage rates trending lower, Annaly’s financial profile stands to improve further.
However, 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 1.14X, higher than the industry average of 1.04X. The company peers, AGNC Investment and Starwood Property Trust, hold forward 12-month P/TB of 1.24X and 1.02X, respectively.
Price-to-Tangible Book TTM
Image Source: Zacks Investment Research
As such, prospective investors may consider waiting for a more attractive entry point. However, existing shareholders may maintain their position in the NLY stock for its income-generating potential and long-term stability.
Image: Bigstock
How to Approach Annaly Stock With Easing Mortgage Rates?
Key Takeaways
Annaly Capital Management’s (NLY - Free Report) performance and prospects are significantly influenced by the mortgage rates. Mortgage rates continue to ease. According to a Freddie Mac report, the average rate on a 30-year fixed-rate mortgage was 6.19% as of Dec. 4, 2025, down from last week, when it averaged 6.23%. A year ago, at this time, the rates averaged 6.69%.
Housing affordability challenges are declining with lower mortgage rates. With rates trending lower and a balanced supply/affordability playing out in the mortgage market, loan demand is increasing. With this turnaround, mortgage originations and refinancing activities 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 activities.
Also, the Federal Reserve cut its benchmark interest rates twice this year, and market participants are expecting a further rate cut this month. The relatively lower rates will ease the earnings pressure, supporting NLY’s net interest income (NII) growth.
Given such positive developments, many investors must be wondering how to play NLY stock. Now, to answer this, it is essential to delve into the details and evaluate various factors at play.
Other Factors Supporting Annaly Performance
Portfolio Diversification: NLY’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 Sept. 30, 2025, the portfolio aggregated $97.8 billion, of which $87.3 billion consisted of highly liquid Agency MBS with actual or implied AAA ratings.
NLY is enhancing its MSR platform through partnerships to strengthen scale and portfolio quality. In October 2025, the company entered a long-term subservicing and MSR purchase agreement with PennyMac Financial Services, leveraging PennyMac’s strong servicing infrastructure and recapture capabilities. The partnership expands Annaly’s servicing network and is expected to drive incremental cost control and operating flexibility, which, in turn, would result in potential long-term earnings accretion.
The company’s emphasis on residential credit further supports consistent returns across diverse economic scenarios. Over the past few years, 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.
Solid Liquidity: Annaly continues to prioritise liquidity and prudent leverage management to navigate market volatility effectively. As of Sept. 30, 2025, the company held $8.8 billion in total assets available for financing, including $5.9 billion in cash and unencumbered Agency MBS, providing ample liquidity during adverse market conditions. This decent liquid position equips Annaly to sustain its operations and capitalize on opportunities, even amid periods of economic stress and financial-market uncertainty, reinforcing its overall financial resilience.
Impressive Payout: NLY has demonstrated a continued focus on shareholder returns through disciplined capital management.
The company pays out regular dividends. In March 2025, NLY raised its cash dividend by 7.7% to 70 cents per share. Over the past five years, the company has raised its dividend once. Its current dividend yield stands at 12.3%. AGNC Investment and Starwood Property offer yields of 13.7% and 10.5%, respectively.
Besides dividends, it has a share repurchase plan. On Jan. 31, 2025, the company’s board approved a common share repurchase program, authorizing up to $1.5 billion in buybacks through Dec. 31, 2029. While no shares have been repurchased under this plan yet, the decent liquidity position will keep the capital distribution plan sustainable.
Reading the Signals: What NLY’s Latest Estimates Indicate
The Zacks Consensus Estimate for Annaly’s 2025 and 2026 sales implies year-over-year growth of 399.6% and 53.2%, respectively.
Sales Estimates
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NLY’s 2025 and 2026 earnings indicates year-over-year growth of 7.4% and 1.5%, respectively.
Earnings Estimates
Image Source: Zacks Investment Research
How to Play Annaly Stock Now?
Shares of Annaly have gained 14.7% in the past year against the industry's decline of 1.2%. Meanwhile, shares of its peer STWD have fallen 8.9%, while AGNC Investment has risen 8%, respectively.
Price Performance
Image Source: Zacks Investment Research
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 mortgage rates trending lower, Annaly’s financial profile stands to improve further.
However, 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 1.14X, higher than the industry average of 1.04X. The company peers, AGNC Investment and Starwood Property Trust, hold forward 12-month P/TB of 1.24X and 1.02X, respectively.
Price-to-Tangible Book TTM
Image Source: Zacks Investment Research
As such, prospective investors may consider waiting for a more attractive entry point. However, existing shareholders may maintain their position in the NLY stock 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.