Can Annaly Sustain Its Impressive 12.2% Dividend Yield?

High dividend yields often attract income-focused investors, and Annaly Capital Management NLY stands out in this regard with its notably high payout.

As a publicly traded mortgage real estate investment trust (mREIT), the company has historically delivered favorable long-term shareholder returns while maintaining a sizable dividend yield that appeals strongly to income-oriented investors. The key question, however, is whether such a generous payout can remain sustainable over the long term.

In 2025, Annaly increased its cash dividend 7.7% to 70 cents per share, reinforcing its commitment to returning capital to shareholders. At present, the company’s dividend yield stands at 12.2%. 

Annaly Capital Management Inc Dividend Yield (TTM)

Annaly Capital Management Inc dividend-yield-ttm | Annaly Capital Management Inc Quote

Beyond dividends, Annaly is also focused on enhancing shareholder value through capital management initiatives. On Jan. 31, 2025, the company’s board authorized a share repurchase program that allows the repurchase of up to $1.5 billion in common stock through Dec. 31, 2029. 

A central factor supporting NLY’s dividend is its disciplined investment strategy, which emphasizes prudent asset selection and efficient capital allocation to produce stable returns. The company primarily invests in Agency mortgage-backed securities (MBS), which are generally considered safer instruments because their principal and interest payments are guaranteed by government-sponsored enterprises such as Fannie Mae, Freddie Mac and Ginnie Mae. As of Dec. 31, 2025, Annaly’s total investment portfolio was valued at $104.7 billion, with $92.9 billion allocated to highly liquid Agency MBS. 

In addition to its portfolio strength, NLY maintains a solid liquidity position that supports its ability to navigate market volatility. At the end of 2025, the company had $9.4 billion in total assets available for financing, including $6.1 billion in cash and unencumbered Agency MBS. This liquidity cushion enhances financial flexibility and positions the company to manage economic stress or shifts in interest-rate conditions while continuing to support its dividend commitments.

In conclusion, Annaly’s large allocation to high-quality Agency MBS, a strong liquidity buffer and disciplined capital management provide a solid foundation for maintaining its generous dividend payments. Nevertheless, investors should remain mindful that mREIT dividends are inherently sensitive to macroeconomic shifts, particularly interest-rate volatility.

How NLY Competes With AGNC & ABR in Terms of Dividends

Annaly’s peers, such as AGNC Investment Corp. AGNC and Arbor Realty Trust, Inc. ABR, have also been focusing on maintaining shareholder returns through consistent dividend payouts. 

AGNC Investment offers a 13.2% dividend yield.  As of Dec. 31, 2025, AGNC Investment’s liquidity, including unencumbered cash and Agency MBS, was $7.6 billion, which reinforces the sustainability of its capital distribution strategy.

Conversely, Arbor Realty has a dividend yield of 13.6%. However, its liquidity position remains comparatively weak. As of Dec. 31, 2025, Arbor Realty had cash and cash equivalents of $482.9 million against long-term debt of $5.5 billion. Such a narrow liquidity cushion raises concerns about the sustainability of its capital distribution in the long term.

Annaly’s Price Performance & Zacks Rank

Over the past six months, NLY shares have gained 3.7% against the industry’s decline of 1.9%.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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