Annaly Capital (NYSE:NLY) is one of our longest and oldest holdings. We like the Annaly Capital dividend. Over the years we have been bearish, we have been bullish, and we have been neutral. Here in 2017 we have leaned neutral to bearish.

We believe that the dividend, being barely covered, helps offset the fact that this mREIT is one of the more overvalued in the sector right now all things considered. We have no plans to sell, not do we plan to buy more. It has been up and down, but continues to pay out that bountiful dividend and allows for accumulation and the power of compound interest.

That said, over the past few quarters Annaly has been very close to not covering its dividend. Does that hold true with the just reported earnings? In this column, we will discuss the critical metrics you should be examining in the mREIT, as well as discuss our projections looking ahead.

Core earnings

Annaly delivered a decent report that was essentially in line with our expectations. There were no real surprises on income. We will tell you that it saw GAAP net income of $367.3 million or $0.31 per share. This is up heavily from the sequential quarter’s $14 million of income, but we need to be clear.

Using GAAP is not very useful for an mREIT. Therefore, we prefer to use a much better metric to help us gauge dividend coverage. This is why we focus on core earnings. Annaly’s core earnings have been locked over the last four quarters.

Now here is one of the issues. While we like to examine core earnings per share as they closely approximate net interest income. However what is hidden here is any hedging spending.

It is important to realize that while core earnings per share came in at $0.30 again, this number has been targeted. Therefore we have been closely watching the dividend as it looks sustainable, but is it?

A word about the Annaly Capital dividend

We will say plainly that we believe the dividend will……..EXPAND TO FULL COLUMN NOW

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