Is Annaly Capital Management a Buy?
Annaly Capital Management (NYSE: NLY) is a real estate investment trust (REIT), a corporate structure intended to throw off a steady stream of income to shareholders. Add in the massive 11% yield the stock is offering today, and investors with an income focus might be tempted to dive in and start collecting a big quarterly dividend check. Don't do it until you fully understand these three risks.
All REITs are not created equal. That's a big issue here because Annaly's focus is on owning mortgages, not physical property. While mortgages do have value, most investors likely think of buildings when they conjure up an image of a REIT. It is an important difference. If a tenant goes belly-up, a REIT with a building can simply find a new renter. From a bigger-picture perspective, if the financial system starts to go haywire (like it did during the deep 2007-2009 recession), there are actual physical assets underpinning the rent roll.
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Source Fool.com
