Will History Repeat Itself For Annaly Capital?

By Marc Lichtenfeld of Wealthy Retirement

Wednesday, April 23, 2025 6:00 PM EDT

In June of 2022, I reviewed the dividend safety of Annaly Capital Management (NYSE: NLY). I warned investors, “If you own Annaly, expect another dividend cut within the next year or two.” At the time, the quarterly dividend was $0.88 per share. Nine months later, it was lowered to $0.65.

It stayed there through all of 2023 and 2024. Then, this year, it was raised to $0.70 in the first quarter.

Now, with a juicy 16% yield, has Annaly turned the corner back toward dividend growth?

Annaly Capital Management is a mortgage real estate investment trust, or REIT, that focuses on individual residences. It has an $81 billion portfolio that has financed more than 900,000 homes.

Net interest income is the cash flow metric that we look at for mortgage REITs. Annaly’s is not good. It’s been falling like a stock market in the face of new tariffs (too soon?).

Chart:

Last year, net interest income rose to $248 million from -$111 million the year before. But that was still a fraction of the nearly $1.5 billion the company made in 2022. This year, net interest income is expected to be nearly cut in half to $130 million.

An even bigger problem is that Annaly pays out about $1.5 billion in dividends each year, but it hasn’t generated that much cash flow in several years. It can’t afford its dividend.

Making matters worse, Annaly has a notorious reputation of being a dividend cutter, with multiple reductions in the past 10 years (and even more if you go back further).

Management has proven that when the going gets tough, they cut the dividend.

Given the company’s history of lowering its dividend and the fact that net interest income doesn’t come close to paying for the current $0.70 per share quarterly dividend, I’ll repeat what I said in 2022.

If you own Annaly, expect another dividend cut within the next year or two.

Dividend Safety Rating: F

Dividend Grade Guide