Before You Buy Annaly: Here's a REIT Stock I'd Buy First
As far as mortgage real estate investment trusts (REITs) go, Annaly Capital (NYSE: NLY) isn't too unusual. But that doesn't make it -- or its double-digit dividend yield -- a good choice for investors. In fact, for most dividend investors, it will probably be a terrible investment option. Boring W.P. Carey (NYSE: WPC) is a better alternative.
The very first thing that should worry investors about Annaly is that it is a mortgage REIT. This is a specialized type of entity that owns collections of mortgages that have been pooled into bond-like securities. The income Annaly generates comes from the cash these securities generate.
Here's the thing: These securities are publicly traded, and their prices go up and down over time. Interest rates and the state of the housing market can have an impact on how they trade. So, too, can simple investor sentiment. That means that the value of Annaly's business, which is basically the value of its portfolio, can rise and fall in sometimes dramatic fashion. In 2022, for example, the book value of the company fell from $31.88 at the start of the year to $20.79 by the end.
Source Fool.com
