Annaly Capital Management (NLY 0.15%) is currently offering up a dividend yield of more than 16%. That's a figure that should catch the eye of all investors, not just those interested in dividends. But don't think you can buy the stock and collect huge quarterly dividend checks for the rest of your life. Here's why this real estate investment trust (REIT) has been a big letdown for income investors over the past decade.

Important comparison points

Although Annaly sports a mid-teens dividend yield, the average REIT, using the Vanguard Real Estate Index ETF as a proxy, offers a yield of just 3.7%. An S&P 500 index fund, meanwhile, has an even lower yield of roughly 1.6%. If all that mattered was the yield, Annaly would be the hands-down winner. In fact, there are very few companies, let alone REITs, that could match up.

But dividend yield doesn't exist in a vacuum. Yields move in the opposite direction as share prices. Which is where things start to get very interesting, because Annaly has long had a relatively high yield. Only the REIT's dividend has been cut repeatedly since 2010. The stock price has followed the dividend down, which has propped up the yield.

If you are a dividend investor looking to live off of the income you generate from your portfolio, Annaly would have been a terrible investment. Some numbers will help show just how bad it has been.

Down, down, down

Over the past decade, a $10,000 investment in Annaly would be worth just under $3,750 today. That is assuming that you spent all of the dividends. If, instead, you reinvested them, which gives you a total return number, your $10,000 would now be worth $12,000 or so. That's better, but over that same span the return offered by the S&P 500 index would have increased your $10,000 to $28,500, if you had spent all the dividends, and $34,400 if you had reinvested them. That's not a favorable comparison.

NLY Chart

NLY data by YCharts

Using a more relevant benchmark, the Vanguard Real Estate Index ETF, doesn't change the outcome all that much. A $10,000 investment in the Vanguard Real Estate Index ETF would have grown to nearly $13,500 if you had spent the dividends. It would have increased to nearly $20,000 if you had reinvested them. Step back for a second and think about those numbers. If you'd reinvested the dividends into Annaly over that span you would have ended up with less than if you owned the Vanguard Real Estate ETF and used the dividends for living expenses. That's a pretty awful outcome.

NLY Chart

NLY data by YCharts

Annaly isn't a bad mortgage REIT, per se. In fact, it is generally well respected. The problem is really the fact that mortgage REITs -- in contrast to REITs that own properties and lease them to tenants -- haven't proven to be reliable dividend stocks. That's why most investors will probably be better off avoiding Annaly and, frankly, the entire mortgage REIT sector.

The numbers tell the story

You can get into the nuances of a mortgage REIT, but the truth is that the figures above say all that most dividend investors need to know. Annaly has not proven to be a sound investment for dividend investors and the high yield is clearly not as attractive as it may at first seem.