Annaly Capital Management (NYSE: NLY) is a real estate investment trust (REIT) that buys mortgage securities. This is a somewhat high-risk niche in the broader REIT sector, but one that often attracts investor attention because of the lofty yields that mortgage REITs usually offer. That's the big story with Annaly, too, since it sports a huge 13%-plus dividend yield today. But despite that ultra-high yield, it probably won't appeal to the passive income investors that might be looking at it. Here's what you need to know before making a buy, sell, or hold decision about Annaly.

To start out on a positive note, Annaly is a very straightforward way for investors to add mortgage exposure to their portfolios. That's because the REIT buys mortgages that have been pooled together into bond-like securities. It collects the interest from those bonds and passes that on, minus operating costs, to investors via dividends. In this way, it's kind of like a mutual fund that focuses on mortgages.

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