Before You Buy Annaly Capital: Here's a REIT I'd Buy First

High yields draw dividend investors like a flame attracts a moth. Sometimes, if the yield is just too high, investors can just as easily end up burned. That's the story when it comes to Annaly Capital Management (NYSE: NLY). Here's why most dividend investors should avoid this mortgage real estate investment trust (REIT), plus a reliable dividend REIT you might want to consider instead.

Annaly's dividend has declined steadily over the past decade. Its dividend yield, however, has remained at around 10% or so (sometimes higher) over the entire span. Dividend yield and stock price move in opposite directions, so the only way that the yield has remained so high is that the stock price has tracked lower along with the dividend. This is a terrible outcome for any investor who bought the REIT expecting to use the income it generated for everyday living costs. The income it generates has plunged and investors have suffered a capital loss.