Annaly Capital Management May Be a Buy, but Is It Right for You?
Wall Street is generally bullish on Annaly Capital Management (NYSE: NLY). Most analysts who follow the mortgage REIT have a buy rating on its stock. Some have recently reiterated their bullish calls, with JonesTrading reconfirming its buy rating while RBC Capital doubled down on its outperform call.
However, just because analysts think the stock is a buy doesn't mean it's right for your portfolio. Here are a couple of factors to consider before buying shares of the high-yielding mortgage REIT.
Mortgage REITs have a very different business model than equity REITs that own income-producing real estate. These entities make money on the spread between the interest earned on their mortgage investments and their weighted average cost of capital, known as the net interest margin. They tend to borrow a lot of money (usually short term) that they lend long term by purchasing mortgage-backed securities (MBS). That makes them more like a bank than a real estate company. It also makes them very susceptible to changes in interest rates, especially since short-term rates are more volatile.
Source Fool.com
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