Annaly (NLY) Cuts Quarterly Dividend by 26% to 65 Cents
Annaly Capital Management, Inc.’s NLY board of directors declared its first-quarter 2023 common stock cash dividend of 65 cents per share. The dividend will be paid out on Apr 28, 2023, to shareholders of record as of Mar 31, 2023.
The announced dividend indicates a 26% decline from the prior dividend amount of 88 cents.
In its fourth-quarter 2022 earnings call, management indicated its intention to reduce quarterly dividends in first-quarter 2023 to a level closer to the company’s historical yield on book value of 11% to 12%, compared to its previous 16% yield on book value. Management believes that this dividend level is sustainable and is in line with the current return potential of NLY’s portfolio.
Management noted, "We believe a quarterly dividend of $0.65, which represents an approximately 12.5% yield on current book value, allows us to appropriately manage the portfolio within conservative risk parameters while also delivering a more sustainable yield that is competitive with our peers as well as broader fixed income benchmarks.”
The lower dividend offers higher scope for reinvestment and the company is eyeing attractive opportunities across its three businesses - Agency, Residential Credit and Mortgage Servicing Rights.
In fact, Annaly's investment strategy is driven by the prudent selection of assets and effective allocation of capital to achieve stable returns. In 2022, this mREIT took proactive efforts to increase exposure in high-coupon securities, rotating out of both lower-coupon to-be-announced securities and specified pools. Amid persistent interest rate volatility, its hedging strategy was focused on managing duration.
The company's investment strategy involves traditional Agency mortgage-backed securities (MBS), which provide downside protection, as well as investments in more non-Agency and credit-focused asset classes that aid in enhancing returns.
As the interest-rate hike cycle nears an end and interest rate volatility reduces, management believe Agency MBS demand should be robust owing to attractive nominal spreads.
Nonetheless, given uncertain market conditions, we expect the company to remain cautious and prioritize risk and liquidity management over incremental returns. With this, robust returns are expected to remain elusive, at least in the short term.
In the past six months, shares of NLY have plunged 21.7% compared with a 21.3% decline in the industry it belongs to.
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NLY currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Enhanced Capital Deployment Plans by Other Finance Companies
Synovus Financial Corp. SNV declared a quarterly cash dividend of 38 cents per share, marking a 11.8% increase from the prior payout. The dividend will be paid out on Apr 3 to shareholders of record as of Mar 16.
Prior to this, SNV hiked its dividend by 3% to 34 cents per share in March 2022.Apart from regular dividend increases, Synovus has a share repurchase program in place. In January 2022, the company authorized share repurchases of up to $300 million for 2022 and during the year, it repurchased shares worth $13 million. Additionally, on Jan 18, SNV authorized share repurchases of up to $300 million for 2023.
Washington Federal WAFD has announced a quarterly cash dividend of 25 cents per share, reflecting a rise of 4.2% from the prior payout. The dividend was paid out on Mar 10 to shareholders of record as of Feb 24.
Prior to the current hike, the company increased its dividend by 4.2% to 24 cents per share in January 2022. WAFD raised its quarterly dividend seven times in the last five years. Also, it has a five-year annualized dividend growth rate of 7.6%. Currently, the company's payout ratio is 25% of earnings.
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