Historically, tumultuous times offer some of the best opportunities to buy stocks, and the market's recent mess surely qualifies. And though real estate finance firm Annaly Capital Management (NYSE: NLY ) has already recovered from recession-induced lows, many investors expect even better times ahead.
In our Motley Fool CAPS community, 89% of the 1,497 investors rating the company are bullish. There's no shortage of reasons why Annaly Capital Management will thrive, three of which I've highlighted below.
But here at the Motley Fool, we're all for looking at both the good and bad sides of an investment. Once you're done with this article, you can read the case against the stock, weigh in with your own comments below, or rate Annaly Capital Management yourself in CAPS.
1. Favorable interest rates
Annaly borrows money at low interest rates, and buys mostly agency mortgage-backed securities from Fannie Mae (NYSE: FNM ) and Freddie Mac (NYSE: FRE ) . It's hard for CAPS members not to like the combination of currently low interest rates and virtually no default risk on substantially all of its investments. With unemployment still stubbornly high, and inflation low, some investors expect the Federal Reserve to continue to keep rates low. That should keep cash flowing at Annaly -- and to its shareholders.
2. Monster dividend
Like its own spinoff Chimera Investment (NYSE: CIM ) , and peers Capstead Mortgage (NYSE: CMO ) and Anworth Mortgage (NYSE: ANH ) , Annaly pays out a monster dividend. It's currently yielding close to 15%, while Chimera, Capstead, and Anworth are yielding nearly 17%, 18%, and 16%, respectively. The high yield helps buffer against many risks facing the companies, and CAPS members like the extra juice it gives potential returns.
3. Growing earnings
In contrast with commercial real estate-focused iStar Financial (NYSE: SFI ) , which generated another loss in the first quarter, Annaly saw a jump in non-GAAP core earnings and a 12% rise in net interest income. Following several quarters of strong results, many investors believe Annaly will keep the trend alive and continue to dish strong payouts to investors.
To see details of what CAPS members are saying now about Annaly Capital Management, just click on over to Motley Fool CAPS and have a look. Also, add your own thoughts directly to this story in the comments box below.
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