Annaly Capital Management (NLY 2.21%) is offering a massive 14%-plus dividend yield today. And the dividend was just increased at the start of 2025, too. Sounds great, right? But, before you run out and buy the stock, you need to dig into the company's history just a little bit. You'll likely be better off with the lower yields on offer from Realty Income (O +0.95%) and Bank of Nova Scotia (BNS 0.48%).
Here's why Annaly could set income investors up for failure while Realty Income and Bank of Nova Scotia should leave you rolling in the dough.
What are you looking to achieve with dividends?
Dividend investors come in all shapes and sizes, so there's no one right way to invest in dividend stocks. However, a common theme is that dividend investors are often trying to create an income stream that can support them in retirement. This is an important fact to consider as you invest your hard-earned savings, be it $100, $1,000, or $100,000. Far too often, investors chase yield without giving proper consideration to the risk of dividend cuts.
Image source: Getty Images.
This is the big problem with Annaly Capital Management's huge dividend yield. The company is a mortgage real estate investment trust (mREIT). That means it buys mortgages that have been pooled into bond-like securities, not physical properties that it leases to tenants. Mortgage REITs are very similar to mutual funds, with the REITs earning the difference between their costs (which include interest expenses) and the interest they receive from the securities they buy.
There are a lot of moving parts, but the important outcome is that the dividends that mREITs pay have proven to be rather unreliable. As the chart below highlights, even though Annaly Capital just increased its dividend in 2025, that comes after a long string of cuts. And even before that string of cuts, the dividend was up and down.
Data by YCharts.
Notice, however, that the share price has tended to trend along with the dividend. So that long downtrend in the dividend meant that income-focused investors would have been left with less income and less capital. That's a terrible outcome for anyone trying to live off their dividends.
Stick with consistent dividend stocks
Compare the ups and downs of Annaly Capital's dividend to the three decades worth of annual dividend increases on offer from the property-owning REIT Realty Income. Its 5.6% yield may be lower, but if you want to feel comfortable that you'll keep getting paid at the same or higher rate, Realty Income wins hands down. And the business model is much easier for investors to understand, given that Realty Income does the same thing you would do if you owned a rental property, only on a much larger scale.
NYSE: O
Key Data Points
Scale is important here, though, because Realty Income is the largest net lease REIT, which just means its tenants pay for most property-level operating costs. Being large has allowed Realty Income to become highly diversified, with over 15,600 properties spread across the United States and Europe. It owns retail, industrial, and a fairly broad group of "other" assets, like vineyards and casinos. All in, it is one of the most diversified and reliable REITs you can own. Boring is really the name of the game for high-yield Realty Income.
For those who don't mind taking on a little more risk, a good choice could be Bank of Nova Scotia, commonly known as Scotiabank. It has paid a dividend every single year since 1833. It didn't cut its dividend like many of the largest U.S. banks did during the Great Recession between 2007 and 2009. And while it paused the increases in its dividend in 2024 as it shifted its business model slightly, it increased them again in 2025. Add in a lofty 5.9% dividend yield, and you can see why dividend investors might be attracted to the stock.
NYSE: BNS
Key Data Points
The key here is that Scotiabank is Canadian. Canada has a highly regulated banking market, with regulators basically giving a handful of large banks entrenched positions. Scotiabank is one of those banks, so the business has a very strong foundation. The heavy regulation has also created a conservative ethos that permeates Scotiabank's operations both in its home market and abroad.
That said, a decision to focus on Central and South America for growth didn't pan out as well as management had hoped. Scotiabank is now refocusing its growth on Mexico and the United States, and making solid early progress. The dividend increase is proof of that. Scotiabank is another solid option if you are looking to buy a reliable dividend stock.
What does $1,000 get you?
With $1,000, you can buy around 18 shares of Scotiabank and 17 shares of Realty Income. And then you can sit back and collect attractive yields that are backed by dividends that are likely to grow over time. Or you can buy 50 or so shares of ultra-high-yielding Annaly Capital and pray that the income stream in the future isn't as volatile as the mREIT's dividend history suggests it will be. Most dividend investors will be better off with Realty Income and Scotiabank.
