Monday, Barclays (LON:BARC) initiated coverage on Annaly Capital Management (NYSE:NYSE:NLY), a $10.6 billion market cap REIT, assigning an Equalweight rating and establishing a price target of $19.00. The new rating reflects the firm's view on the company's performance prospects in the current market environment. According to InvestingPro data, the stock currently offers an attractive 13.7% dividend yield, having maintained dividend payments for 28 consecutive years.
Annaly Capital Management operates a diversified Real Estate Investment Trust (REIT) model, with investment verticals that include agency Mortgage-Backed Securities (MBS), mortgage servicing rights, and residential credit. The agency MBS is currently the largest vertical for Annaly, comprising approximately 61% of its portfolio.
While the company has the flexibility to adjust this allocation between 50% and 70% based on the investment outlook, InvestingPro's analysis indicates the company maintains a FAIR financial health score, with particularly strong momentum metrics.
Barclays' analysis suggests that Annaly Capital Management's diversified approach positions it well to generate appealing risk-adjusted returns. Despite this, the firm anticipates potential challenges due to expected rate and spread volatility in the near term. This volatility is attributed to the market's adjustment to changing rate cut expectations and policy uncertainty, particularly with the transition to a new administration.
The firm's initiation of an Equalweight rating indicates a neutral stance on the stock, suggesting that the analysts believe the company's stock performance will align with the broader market or sector performance. According to Barclays, Annaly Capital Management's shares are currently trading at 0.97 times Price to Book (P/B) value, which has influenced their rating decision.
Investors and market watchers will be paying close attention to how Annaly Capital Management navigates the forecasted volatility and whether the company can adjust its investment strategy effectively to maintain its track record of producing attractive returns amidst the shifting economic landscape.
While currently showing a loss in the last twelve months, InvestingPro analysis reveals analysts expect the company to return to profitability this year, with positive sales growth forecasted.
For deeper insights into Annaly's valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, along with 8 additional ProTips and extensive financial metrics.
In other recent news, Annaly Capital Management has launched a new share repurchase program, authorized to buy back up to $1.5 billion of its common stock and up to 63.5 million shares of its preferred stock. The authorization for these new programs extends until December 31, 2029.
The company reported robust earnings and revenue growth in the third quarter of 2024, with an economic return of 4.9% and a cumulative return of 10.5% for the year to date. This performance is attributed to initial rate cuts by the Federal Reserve and a solid U.S. economy. Annaly's Agency MBS portfolio expanded by over $4 billion notional, and the Residential Credit portfolio reached $6.5 billion in economic market value.
Piper Sandler reaffirmed its Overweight rating on Annaly Capital, highlighting the company's diversified business model and stable dividend. According to Annaly's outlook, a modest earnings increase is expected in the fourth quarter. These are recent developments within the company.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.