Key Points
Annaly Capital Management is a mortgage REIT.
The stock has an astonishingly large 13%+ yield.
Annaly Capital is not a particularly attractive income stock, but it could still help some investors build seven-figure portfolios.
10 stocks we like better than Annaly Capital Management ›
The S&P 500 index is currently offering a slim little 1.2% yield. The average real estate investment trust (REIT) is yielding around 3.9%. Annaly Capital Management (NYSE: NLY), a mortgage REIT, is offering an over 13% dividend yield today! While you shouldn’t buy Annaly Capital if you are looking for a reliable income stream, it can still be a key part of a millionaire-maker portfolio. Here’s what you need to know.
Annaly Capital is not a reliable income investment
Annaly Capital will probably pop up on most dividend screens given the huge yield it offers. But yield alone is not a good reason to buy this stock, particularly if you need the income your portfolio generates to pay for living expenses. A simple graph can illustrate the issue.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
NLY data by YCharts.
Notice the volatility of the dividend and how the stock price tends to track along with the dividend, up and down. Although the dividend was just increased, the longer trend here is downward. So, dividend investors who bought a decade ago because of a lofty dividend yield have ended up with less income and less capital. Not ideal for a dividend-focused investor.
The problem is with the fact that Annaly is a mortgage real estate investment trust (REIT). This is a fairly complex niche of the broader REIT sector. Annaly basically buys mortgages that have been pooled into bond-like securities. Mortgages get repaid over time, with a portion of the payment covering interest expenses and a portion reducing the principal of the mortgage. So the huge yield here effectively results in the shrinking of the REIT’s portfolio over time, thanks to the principal repayments. On top of that, you can add the impact of interest rates, housing market dynamics, and even mortgage repayment trends.
Image source: Getty Images.
Annaly is not a bad investment
Here’s the thing — Annaly Capital actually does a fairly good job of achieving its goal. That goal, however, is generating an attractive total return. It is not focused on income, even though the dividend plays an important part in the story. The key is that in order to fully benefit from this REIT’s approach, you have to reinvest the dividend, not spend it.
NLY Total Return Level data by YCharts.
As the chart above shows, Annaly’s total return is roughly similar to that of the S&P 500 index over time. However, the chart highlights that the return profile has been different. That makes Annaly a very attractive option for investors looking to create a diversified asset allocation portfolio.
Essentially, adding Annaly to an asset allocation portfolio can provide investors with returns that aren’t directly tied to the general performance of the stock market. Or, to put it a different way, when stocks zig, Annaly could be zagging. The end result is a better total return for the overall portfolio. But if you spend the income this REIT throws off, you won’t be able to fully benefit from this fact.
Is Annaly a millionaire-maker stock?
Annaly Capital probably isn’t a millionaire-maker stock all on its own. But as a part of a larger asset allocation portfolio, this total return-focused mREIT could help you build a seven-figure nest egg. The other big takeaway here, however, is that Annaly is far more complex than a property-owning REIT, and most income-focused investors should probably avoid it despite the huge dividend yield it offers.
Should you invest $1,000 in Annaly Capital Management right now?
Before you buy stock in Annaly Capital Management, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Annaly Capital Management wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $636,563!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,108,033!*
Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 181% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of August 4, 2025
Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
