Annaly Capital Management
NLY
$22.75
-0.13%
Annaly Capital Management, Inc. is a leading American mortgage real estate investment trust (mREIT) that generates income by investing in mortgage-backed securities and related assets, primarily through its Agency, Residential Credit, and Mortgage Servicing Rights segments. As one of the largest and most established players in the mREIT sector, Annaly is recognized for its scale, diversified investment strategies, and its role as a significant income vehicle for shareholders. The current investor narrative centers on the impact of Federal Reserve policy—particularly the potential for higher-for-longer interest rates and balance sheet reduction—which creates near-term valuation pressure but also positions the company for long-term opportunities as it navigates a complex rate environment. Recent discussions also highlight the company's strategic focus on optimizing returns through prudent management of its diversified portfolio, with attention on its ability to sustain dividends and manage leverage in a volatile market.…
NLY
Annaly Capital Management
$22.75
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Investment Opinion: Should I buy NLY Today?
Based on the analysis, I rate NLY as a 'Hold'. The stock offers a compelling 13.16% dividend yield and trades at a low PE of 7.66x, but the high leverage and negative free cash flow introduce significant risk. The analyst consensus is 'buy' with an average target of $24.23, implying 6.6% upside, but this is modest given the risks. The stock is suitable for income-focused investors who can tolerate volatility and are willing to hold for the long term.
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NLY 12-Month Price Forecast
The AI assessment is neutral, reflecting the balanced bull and bear arguments. The low valuation and high dividend yield are positive, but the financial fragility and market risks temper enthusiasm. The stock is likely to trade in a range over the next 12 months, with the outcome depending on interest rate movements and the sustainability of the dividend. If NLY can maintain its dividend and book value, the stock could appreciate toward the analyst target. However, any sign of dividend stress would likely lead to a sharp decline. The stance would be upgraded to bullish if the company demonstrates improved free cash flow and a more sustainable payout ratio, or if the Fed signals a more accommodative policy. It would be downgraded to bearish if the dividend is cut or if leverage increases further.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Annaly Capital Management's 12-month outlook, with a consensus price target around $24.23 and implied upside of +6.5% versus the current price.
Average Target
$24.23
0 analysts
Implied Upside
+6.5%
vs. current price
Analyst Count
—
covering this stock
Price Range
$23 - $25
Analyst target range
Annaly is covered by 11 analysts, with a consensus recommendation of 'buy' and a mean recommendation score of 1.92 (where 1 is strong buy and 5 is sell). The average target price is $24.23, implying an upside of approximately 6.6% from the current price of $22.72. The distribution of ratings is not explicitly provided, but the consensus leans bullish, with recent actions from firms like Piper Sandler (Overweight), RBC Capital (Outperform), and JP Morgan (Overweight) reinforcing this sentiment. The low target price is $22.50, which is slightly below the current price, suggesting that some analysts see limited downside, while the high target of $25.00 implies a potential upside of 10%. The relatively narrow spread between the low and high targets (about 11%) indicates a moderate level of conviction among analysts, though the range reflects uncertainty about the impact of interest rate movements on the company's earnings. Recent ratings have been stable, with no major downgrades, indicating that analysts are maintaining their positive outlook on the stock.
Bulls vs Bears: NLY Investment Factors
NLY presents a classic high-yield, high-risk investment profile. The bull case rests on a compelling valuation (PE of 7.66x, PB of 0.89), a massive 13.16% dividend yield, and a consensus 'buy' rating from analysts. However, the bear case is equally strong, citing extreme leverage (D/E of 6.95), negative free cash flow, and high earnings volatility. The most critical tension is the sustainability of the dividend: with a payout ratio of 92.8% and negative FCF, any significant earnings decline could force a dividend cut, which would likely erase the stock's appeal and cause a sharp price drop. Currently, the bearish evidence is slightly stronger due to the financial fragility, but the stock's low valuation and high yield provide a cushion for patient investors.
Bullish
- Attractive Valuation with Low PE: NLY trades at a trailing PE of 7.66x and forward PE of 7.31x, well below the broader market and its own historical average. This low multiple suggests the market is pricing in significant risks, but also offers a margin of safety if earnings hold up.
- High Dividend Yield of 13.16%: With a dividend yield of 13.16%, NLY offers one of the highest yields in the market, making it highly attractive for income-focused investors. The payout ratio of 92.8% indicates the dividend is well-covered by earnings, though it leaves little room for error.
- Analyst Consensus is Buy: The consensus recommendation is 'buy' with a mean score of 1.92 (1=strong buy, 5=sell). The average analyst target price of $24.23 implies an upside of 6.6% from the current price of $22.72, with a high target of $25.00 offering 10% upside.
- Revenue Growth of 9.58% YoY: In Q1 2026, revenue grew 9.58% year-over-year to $1.63 billion, driven by a larger investment portfolio and higher interest income. This growth, while modest, demonstrates the company's ability to expand its asset base in a challenging rate environment.
Bearish
- High Leverage with Debt-to-Equity of 6.95: NLY's debt-to-equity ratio of 6.95 is extremely high, reflecting the leveraged nature of mortgage REITs. This amplifies both gains and losses, making the stock highly sensitive to interest rate movements and credit spreads.
- Negative Free Cash Flow: The trailing twelve-month free cash flow is -$1.58 billion, indicating that the company is not generating enough cash to cover its dividend and investment activities. This reliance on external financing increases financial risk, especially if credit conditions tighten.
- Earnings Volatility is High: Net income swung from $57.1 million in Q2 2025 to $1.01 billion in Q4 2025, then down to $282.7 million in Q1 2026. This volatility, driven by interest rate changes and portfolio valuations, makes earnings difficult to predict and can lead to sharp price swings.
- Underperformance vs. S&P 500: Over the past year, NLY returned 11.76% while the S&P 500 returned 18.19%, underperforming by 6.43 percentage points. Relative strength is negative across all timeframes (1-month, 3-month, 6-month, YTD), indicating persistent weakness compared to the broader market.
NLY Technical Analysis
Annaly's stock is currently in a recovery phase within a broader uptrend, as evidenced by a 1-year price change of +11.76%, though it has faced volatility in recent months. The current price of $22.72 sits at approximately 74% of its 52-week range (between $20.00 and $24.52), indicating that while the stock has pulled back from its highs, it remains well above its lows. This positioning suggests a market that is cautiously optimistic but not overly exuberant, with the stock having room to run if momentum builds but also vulnerable to downside if support levels fail. The 52-week high of $24.52 represents a key resistance level, while the low of $20.00 provides a critical support zone.
Beta
1.24
1.24x market volatility
Max Drawdown
-14.9%
Largest decline past year
52-Week Range
$20-$25
Price range past year
Annual Return
+8.8%
Cumulative gain past year
| Period | NLY Return | S&P 500 |
|---|---|---|
| 1m | +0.8% | +3.6% |
| 3m | +0.9% | +5.1% |
| 6m | -1.0% | +13.8% |
| 1y | +8.8% | +22.2% |
| ytd | -0.7% | +13.1% |
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NLY Fundamental Analysis
Annaly's revenue trajectory shows a mixed but generally positive trend, with the most recent quarter (Q1 2026) reporting revenue of $1.63 billion, up 9.58% year-over-year. However, this growth is not consistent across quarters; for instance, Q4 2025 revenue was $1.79 billion, while Q3 2025 was $1.63 billion, indicating some volatility. The company's net income in Q1 2026 was $282.65 million, a significant improvement from the $57.10 million in Q2 2025, but down from the $1.01 billion in Q4 2025, reflecting the impact of interest rate changes on its portfolio. Gross margin remains exceptionally high at 98.9%, which is typical for a financial firm that primarily earns interest income, but the operating margin of 102.6% suggests that the company's core operations are highly efficient, though this is partly due to accounting treatments in the REIT structure.
Quarterly Revenue
$1.6B
2026-03
Revenue YoY Growth
+9.6%
YoY Comparison
Gross Margin
98.9%
Latest Quarter
Free Cash Flow
$-1.6B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is NLY Overvalued?
Given that Annaly's net income is positive, the primary valuation metric selected is the price-to-earnings (PE) ratio. The trailing PE is 7.66x, while the forward PE is 7.31x, indicating that the market expects slightly higher earnings in the future. This relatively low PE reflects the market's perception of the risks associated with mortgage REITs, including interest rate sensitivity and leverage. Compared to the industry average, Annaly's PE is at a discount, as many REITs trade at higher multiples due to their growth prospects. The company's price-to-book ratio of 0.89x suggests that it is trading below its book value, which is common for mREITs but may indicate undervaluation if the portfolio is performing well. Historically, Annaly's PE has ranged from as low as 1.29x in Q1 2022 to as high as 147x in Q2 2025, with the current level near the lower end of this range, suggesting that the stock is not overvalued relative to its own history.
PE
7.7x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 1x~34x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
18.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are substantial. NLY's debt-to-equity ratio of 6.95 indicates heavy reliance on borrowed funds, which amplifies the impact of interest rate changes on its portfolio. The company's negative free cash flow of -$1.58 billion over the trailing twelve months means it must access capital markets to fund its dividend and operations, a risky proposition if credit conditions tighten. Additionally, the payout ratio of 92.8% leaves minimal retained earnings to absorb losses, making the dividend vulnerable to any earnings shortfall. Revenue concentration in the Agency segment, which generates the majority of income, exposes the company to prepayment risk and changes in mortgage rates, adding to earnings volatility.
FAQ
The key risks of holding NLY are: (1) Financial risk: high leverage (debt-to-equity of 6.95) and negative free cash flow of -$1.58 billion could lead to financial distress if credit conditions tighten. (2) Interest rate risk: as a mortgage REIT, NLY is highly sensitive to interest rate changes; rising rates could reduce the value of its portfolio and its net interest margin. (3) Dividend risk: with a payout ratio of 92.8%, the dividend is at risk if earnings decline, and a cut would likely cause the stock to fall. (4) Market risk: the stock's beta of 1.237 means it is more volatile than the market, and it has underperformed the S&P 500 over the past year. These risks are ranked by severity, with dividend risk being the most immediate concern.
The 12-month forecast for NLY is mixed. In a bull case (30% probability), the stock could reach $24.00-$25.00 if the Fed becomes more dovish and mortgage spreads tighten. In a base case (50% probability), the stock is likely to trade in the $22.50-$24.00 range, with the average analyst target of $24.23 providing a modest upside. In a bear case (20% probability), the stock could fall to $20.00-$22.50 if the Fed raises rates more than expected and the dividend is cut. The most likely scenario is the base case, assuming the Fed maintains a 'higher-for-longer' stance and NLY continues to pay its dividend. Investors should monitor interest rate developments and the company's earnings reports for signs of change.
NLY appears undervalued based on several metrics. The trailing PE of 7.66x is well below the market average and the company's own historical range. The price-to-book ratio of 0.89 indicates the stock is trading at an 11% discount to its book value, which is common for mREITs but often signals undervaluation. The forward PE of 7.31x suggests the market expects earnings to improve slightly. Compared to the industry, NLY trades at a discount, reflecting the higher risks associated with mortgage REITs. The valuation implies that the market is pricing in a significant risk of dividend cuts or book value erosion, but if the company can maintain its dividend, the stock could be undervalued.
NLY can be a good buy for income investors seeking a high yield, but it is not without risks. The stock offers a 13.16% dividend yield, which is very attractive, and trades at a low PE of 7.66x, suggesting it is not overvalued. However, the high debt-to-equity ratio of 6.95 and negative free cash flow of -$1.58 billion indicate financial fragility. The analyst consensus is 'buy' with an average target of $24.23, implying 6.6% upside. For investors who can tolerate volatility and have a long-term horizon, NLY could be a good addition to a diversified portfolio, but it is not suitable for risk-averse investors or those needing stable income.
NLY is more suitable for long-term investment, given its high dividend yield and the potential for capital appreciation over time. The stock's beta of 1.237 indicates high volatility, making it risky for short-term trading. The company's earnings are volatile, and the stock price can swing significantly in response to interest rate changes. For long-term investors, the 13.16% dividend yield provides a substantial income stream that can compound over time, and the low valuation offers a margin of safety. A minimum holding period of 3-5 years is recommended to ride out the volatility and benefit from the dividend income. Short-term traders may find opportunities, but the risks are elevated, and the stock's performance is highly dependent on macro factors.