Annaly Capital Management, Inc. (NLY Quick QuoteNLY - Free Report) emphasized dividend sustainability, disciplined leverage and selective investment opportunities during its third-quarter 2026 earnings call, despite significant pressure on mortgage-backed securities and book value.

Management maintained a constructive outlook across its three investment businesses while acknowledging persistent interest-rate volatility, higher funding costs and housing affordability challenges.

NLY Defends Dividend Amid Book Value Pressure

Chief executive officer and Co-Chief investment officer David Finkelstein emphasized that Annaly's existing portfolio continues to support its quarterly dividend of 75 cents per share.

Responding to a Keefe, Bruyette & Woods analyst, Finkelstein said management expects earnings available for distribution (EAD) to exceed the dividend again in the fourth quarter.

EAD reached 80 cents per share, exceeding the Zacks Consensus Estimate of 77 cents per share. However, reported revenues of $543.6 million missed the $596.1-million consensus. Book value declined 11.4% sequentially to $17.86.

Annaly Capital Management Inc Price, Consensus and EPS Surprise

Annaly Capital Management Inc price-consensus-eps-surprise-chart | Annaly Capital Management Inc Quote

Annaly Maintains Defensive Hedging Amid Volatility

Finkelstein attributed the difficult quarter to rising Treasury yields, wider mortgage spreads and elevated interest-rate volatility. These conditions contributed to a negative 7.6% economic return.

Chief financial officer Serena Wolfe highlighted that economic leverage increased to 5.9 times from 5.6 times, primarily reflecting lower equity. The hedge ratio increased to 100% from 97%.

During discussions with Piper Sandler, Finkelstein explained that management had increased Treasury futures hedges during the market sell-off and intends to consider replacing some futures with interest-rate swaps.

NLY Sees Higher Returns in Agency Mortgages

Head of Agency V.S. Srinivasan explained that wider mortgage spreads have improved prospective investment returns, particularly for 5.5% and 6% coupon securities.

Management identified prospective Agency returns in the mid-to-high teens, supported by attractive entry spreads and continued demand from institutional investors.

Finkelstein noted that Annaly rotated more than $2 billion of seasoned mortgage pools into higher-coupon securities early in the fourth quarter. Management expects declining volatility to improve market conditions while continuing to monitor duration exposure.

Annaly Prioritizes Residential Credit Expansion

Co-Chief investment officer and Head of residential credit Michael Fania highlighted record quarterly correspondent loan fundings of $5.8 billion and $7.4 billion in third-quarter securitizations.

During the Piper Sandler discussion, Finkelstein identified residential credit as management's preferred destination for incremental capital, followed closely by Agency mortgages and then mortgage servicing rights.

Fania outlined prospective residential credit returns of 13% to 16%, supported by securitization opportunities and financing arrangements. He also emphasized conservative underwriting as housing affordability pressures persist.

NLY Expects Mortgage Servicing Opportunities

Head of mortgage servicing rights Ken Adler highlighted the portfolio's expansion to $4.3 billion, supported by selective bulk purchases and growing flow-channel activity.

Adler explained that higher interest rates support servicing cash flows through reduced mortgage prepayments and increased income earned on borrower escrow balances.

Responding to a JPMorgan analyst, Adler said industry consolidation, technological efficiency and weak origination profitability should encourage continued servicing-rights sales. Finkelstein added that Annaly remains selective about acquisition pricing.

Annaly Balances Liquidity With Capital Deployment

Wolfe reported $8.5 billion of assets available for financing, supporting the company's flexibility amid uncertain market conditions.

Management raised $757 million through common equity issuance and redeemed approximately $443 million of preferred stock, actions Finkelstein connected to capital structure optimization.

Finkelstein maintained that current leverage provides sufficient earnings potential, although the company retains capacity for tactical expansion. His remarks emphasized balancing investment opportunities against capital preservation rather than aggressively increasing exposure.

NLY Maintains a Selective Outlook

Management entered the fourth quarter expecting some moderation in volatility while remaining vigilant about interest-rate exposure and mortgage market conditions.

Finkelstein's overarching message centered on diversified earnings, available liquidity and disciplined capital allocation across Agency mortgages, residential credit and servicing rights.

What NLY's Zacks Rank and Style Scores Indicate

Annaly currently carries a Zacks Rank #2 (Buy), indicating favorable near-term earnings estimate revision characteristics. Its Value Score of B and Momentum Score of A highlight relatively attractive valuation and price momentum characteristics. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, the Growth Score of F indicates weak growth characteristics, while the VGM Score of C reflects a mixed overall profile across value, growth and momentum. The favorable Value and Momentum Scores complement its Zacks Rank, but the weaker Growth and composite scores warrant consideration. The Zacks Rank remains subject to change as analysts revise earnings estimates following the latest results.