Annaly Capital Management
NLY
$22.53
-1.44%
Annaly Capital Management is a leading mortgage real estate investment trust (mREIT) that invests primarily in agency mortgage-backed securities (MBS) collateralized by residential mortgages, generating income for stockholders through prudent leverage and risk management. As one of the largest publicly traded mREITs with a market cap exceeding $14 billion, Annaly distinguishes itself through its scale, diversified investment strategies across agency, residential credit, and mortgage servicing rights, and a track record of consistent dividends. The current investor narrative centers on the impact of Federal Reserve policy on net interest margins and book value, with recent news highlighting potential headwinds from a hawkish Fed pivot under a Kevin Warsh-led Fed, which could compress spreads and pressure valuations in the near term, while long-term opportunities may arise from higher rate environments.…
NLY
Annaly Capital Management
$22.53
Related headlines
Investment Opinion: Should I buy NLY Today?
Rating: Hold. NLY is a high-yield income stock with a compelling dividend, but significant financial risks and macro headwinds warrant caution. The lack of analyst consensus (only 1 analyst) and wide EPS range ($2.43-$3.93) highlight uncertainty. The stock's low P/E of 7.66x and P/B of 0.89x suggest it is undervalued, but the negative free cash flow and high leverage temper enthusiasm.
Supporting Evidence: The trailing P/E of 7.66x is below the typical mREIT range of 8-12x, and the P/B of 0.89x indicates a discount to book value. Revenue has shown sequential improvement from Q3 2025's $1.63B to Q4 2025's $1.79B, and net income rebounded strongly to $1.013B. The dividend yield of 13.16% is attractive, but the payout ratio of 92.8% leaves little room for error. The PEG ratio of 0.095 suggests the stock is cheap relative to earnings growth, but mREIT earnings are volatile.
Risks & Conditions: The biggest risks are a dividend cut due to negative free cash flow and a hawkish Fed that compresses margins. This Hold would upgrade to Buy if the Fed signals a pause or rate cut, or if free cash flow turns positive. It would downgrade to Sell if the dividend is cut or if book value declines significantly. Overall, NLY appears undervalued relative to its own history and peers, but the risks justify a cautious stance.
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NLY 12-Month Price Forecast
NLY offers a high dividend yield and trades at a discount to book value, but faces significant risks from high leverage, negative free cash flow, and sensitivity to Fed policy. The base case of range-bound trading is most likely, with a 50% probability. The bull case depends on a dovish Fed, while the bear case could materialize if the Fed tightens further. The neutral stance reflects the balance between attractive valuation and substantial risks. An upgrade to bullish would require evidence of improving free cash flow or a clear Fed pivot, while a downgrade to bearish would follow a dividend cut or sharp book value decline.
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 $29.29 and implied upside of +30.0% versus the current price.
Average Target
$29.29
1 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
1
covering this stock
Price Range
$18 - $29
Analyst target range
Insufficient analyst coverage available. Only 1 analyst provides estimates, with an average EPS estimate of $2.90 for the current year, ranging from $2.43 to $3.93. The lack of a consensus target price and buy/sell distribution means we cannot calculate implied upside/downside. This limited coverage is typical for mREITs, which are often followed by a niche group of analysts, but the single estimate suggests low institutional interest and less efficient price discovery. The wide EPS range ($2.43–$3.93) indicates high uncertainty about future earnings, driven by unpredictable interest rate movements and spread dynamics. Investors should rely more on fundamental analysis and sector trends rather than analyst sentiment for decision-making.
Bulls vs Bears: NLY Investment Factors
NLY presents a mixed picture: a high dividend yield and low valuation multiples are attractive for income-seeking investors, but the company faces significant risks from high leverage, negative free cash flow, and sensitivity to Fed policy. The bull case rests on the stock being undervalued relative to earnings and book value, with potential for price appreciation if interest rate fears subside. The bear case centers on the sustainability of the dividend and the risk of further book value erosion in a rising rate environment. The single most important tension is whether the Fed's monetary policy will allow NLY to maintain its net interest margins and dividend payout, as this will determine if the stock is a value trap or a genuine bargain.
Bullish
- Attractive Dividend Yield: NLY offers a dividend yield of 13.16%, which is exceptionally high and provides a substantial income stream for investors. This yield is supported by a payout ratio of 92.8%, indicating that most earnings are distributed to shareholders.
- Low Valuation Multiples: The trailing P/E of 7.66x and forward P/E of 7.65x are below the typical range for mortgage REITs (8-12x), suggesting the stock is undervalued. The P/B ratio of 0.89x also indicates the stock trades below book value, offering a potential margin of safety.
- Recent Earnings Recovery: Net income swung from a loss of -$9.5 million in Q2 2024 to a profit of $1.013 billion in Q4 2025, demonstrating a strong earnings recovery. The net margin improved to 56.7% in Q4 2025, reflecting better operating efficiency.
- Large Market Cap and Scale: With a market cap of $14.3 billion, NLY is one of the largest publicly traded mREITs, providing scale advantages in accessing capital and managing risk. Its diversified investment strategies across agency, residential credit, and mortgage servicing rights reduce concentration risk.
Bearish
- High Leverage and Liquidity Risk: The debt-to-equity ratio of 6.95x is extremely high, amplifying financial risk. The current ratio of 0.035 is critically low, indicating that the company may struggle to meet short-term obligations if funding markets tighten.
- Negative Free Cash Flow: Free cash flow (TTM) is negative at -$222 million, meaning the company is not generating enough cash from operations to cover dividends and investments. This reliance on external financing or asset sales poses a sustainability risk.
- Underperformance vs. Market: NLY's 1-year price return of +15.4% significantly lags the S&P 500's +20.6% gain. Relative strength is negative across all time frames (1-month: -2.7%, 3-month: -7.9%, 6-month: -10.7%), indicating persistent underperformance.
- Sensitivity to Fed Policy: Recent news highlights that a hawkish Fed pivot under a Kevin Warsh-led Fed could compress net interest margins and pressure book values. NLY's beta of 1.237 amplifies market moves, making it vulnerable to interest rate volatility.
NLY Technical Analysis
The stock is in a recovery phase from a downtrend, with a 1-year price change of +15.4%, significantly underperforming the S&P 500's +20.6% gain. The current price of $22.86 sits at 82.4% of its 52-week range ($19.39–$24.52), indicating it has rebounded from the lows but remains below the highs, suggesting cautious optimism rather than full momentum. The 52-week low of $19.39 was set in March 2026, and the stock has since climbed 17.9% from that trough, but it still trades 6.8% below the 52-week high of $24.52, reflecting lingering uncertainty about the sector's outlook. Short-term momentum is positive but decelerating: the 1-month change of +6.77% outpaces the 3-month change of +3.25%, and both are stronger than the 6-month change of -1.89%, indicating a recent acceleration that may be losing steam. The relative strength versus the S&P 500 is negative over 1-month (+2.7% vs. +4.07%), suggesting the stock is underperforming the broader market in the near term, which could signal a lack of conviction in the recovery. The 52-week high of $24.52 acts as key resistance, while the 52-week low of $19.39 provides support; a breakout above $24.52 would signal a resumption of the uptrend, while a breakdown below $19.39 could trigger further downside. Beta of 1.237 indicates the stock is 23.7% more volatile than the market, meaning it amplifies market moves—a factor that demands careful position sizing, especially given the stock's recent drawdown of -14.88% from its peak.
Beta
1.24
1.24x market volatility
Max Drawdown
-14.9%
Largest decline past year
52-Week Range
$19-$25
Price range past year
Annual Return
+14.2%
Cumulative gain past year
| Period | NLY Return | S&P 500 |
|---|---|---|
| 1m | +2.4% | +1.0% |
| 3m | +0.6% | +7.9% |
| 6m | -3.4% | +8.5% |
| 1y | +14.2% | +20.1% |
| ytd | -1.6% | +9.9% |
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NLY Fundamental Analysis
Revenue has been volatile but shows a recent uptick: Q4 2025 revenue of $1.788 billion declined 8.36% year-over-year from Q4 2024's $1.951 billion, yet it rebounded from Q3 2025's $1.630 billion and Q2 2025's $1.789 billion. The multi-quarter trend reveals a deceleration from 2024's stronger quarters (Q1 2024: $1.510B, Q2 2024: $1.646B) to 2025's mixed results, with the agency segment likely driving the bulk of revenue given its dominant contribution. The YoY decline in Q4 2025 suggests headwinds from lower interest income or spread compression, but the sequential improvement from Q3 2025 offers a glimmer of stabilization. Net income swung dramatically from a loss of -$9.5 million in Q2 2024 to a profit of $1.013 billion in Q4 2025, reflecting the volatile nature of mREIT earnings driven by fair value changes and interest rate movements. Gross margin remains exceptionally high at 99.9%, typical for mREITs where cost of revenue is minimal, but net margin of 56.7% in Q4 2025 is robust, though it fluctuates widely (e.g., 3.2% in Q2 2025). The operating margin of 102.6% in Q4 2025 (due to negative other expenses) is not sustainable, but the underlying trend shows improving profitability from the negative margins seen in 2023. The balance sheet is highly leveraged with a debt-to-equity ratio of 6.95, common for mREITs, but this amplifies risk. Free cash flow (TTM) is negative at -$222 million, indicating the company relies on external financing or asset sales to fund operations and dividends. ROE of 12.6% is decent but below historical highs, and the current ratio of 0.035 is extremely low, typical for mREITs that hold illiquid assets, but it underscores liquidity risk if funding markets freeze.
Quarterly Revenue
$1.8B
2025-12
Revenue YoY Growth
-8.4%
YoY Comparison
Gross Margin
99.9%
Latest Quarter
Free Cash Flow
$-222163000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is NLY Overvalued?
Since net income is positive (TTM net income of $1.013 billion), the primary valuation metric is the P/E ratio. The trailing P/E is 7.66x, while the forward P/E is 7.65x, implying the market expects earnings to remain roughly flat. The near-identical trailing and forward multiples suggest no significant growth premium is priced in, consistent with a mature, cyclical mREIT. Compared to the industry average P/E (not provided, but mortgage REITs typically trade at 8-12x), Annaly's 7.66x appears at a discount, potentially reflecting market concerns about book value volatility and dividend sustainability. The P/B ratio of 0.89x indicates the stock trades below book value, a common feature for mREITs in rising rate environments, and suggests the market is discounting the asset base. Historically, Annaly's P/E has ranged from as low as 1.27x (Q1 2022) to as high as 51.1x (Q2 2025), with the current 7.66x near the lower end of its 5-year range. This low multiple implies the market is pricing in pessimistic expectations, possibly due to the Fed's hawkish stance and potential for further book value erosion. The PEG ratio of 0.095 suggests the stock is cheap relative to its earnings growth, but given the volatility of mREIT earnings, this metric should be interpreted with caution.
PE
7.7x
Latest Quarter
vs. Historical
High-End
5-Year PE Range -246x~51x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
18.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: NLY's high debt-to-equity ratio of 6.95x and negative free cash flow of -$222 million TTM indicate significant financial leverage and cash flow strain. The company relies on external financing to fund operations and dividends, which could become problematic if credit markets tighten. Additionally, the extremely low current ratio of 0.035 suggests liquidity risk, as the company may not have sufficient short-term assets to cover liabilities. The volatile earnings history, with net income swinging from a loss of -$9.5 million in Q2 2024 to a profit of $1.013 billion in Q4 2025, underscores the unpredictability of mREIT earnings.
Market & Competitive Risks: NLY's stock has underperformed the S&P 500 by over 5% in the past year, and its beta of 1.237 indicates higher volatility than the market. The company is highly sensitive to interest rate changes, as a hawkish Fed pivot could compress net interest margins and reduce book value. Recent news about a potential Kevin Warsh-led Fed suggests further headwinds for mortgage REITs. Additionally, the stock trades at a P/B of 0.89x, which, while potentially a value opportunity, also reflects market skepticism about asset quality.
Worst-Case Scenario: In a worst-case scenario, a sustained rise in interest rates or a credit market freeze could force NLY to cut its dividend, leading to a sharp sell-off. The 52-week low of $19.39 represents a potential downside of -15.2% from the current price of $22.86. If the company faces a liquidity crisis, the stock could fall further, potentially revisiting historical lows. Investors could lose up to 35% or more in such an adverse scenario, especially if the dividend is suspended.
FAQ
The primary risks are financial: high leverage (debt-to-equity of 6.95x) and negative free cash flow (-$222 million) threaten dividend sustainability. Market risk includes sensitivity to Fed policy, as a hawkish stance could compress net interest margins and reduce book value. Competitive risk is moderate, but the mREIT sector is crowded. Company-specific risk includes the potential for a dividend cut, which would likely cause a sharp stock decline. The most severe risk is a liquidity crisis given the current ratio of 0.035, which could force asset sales at unfavorable prices.
The 12-month outlook is mixed. The base case (50% probability) sees the stock trading in a range of $21-$23.50, supported by the high dividend yield but constrained by macro headwinds. The bull case (25% probability) targets $24.52-$26, driven by a dovish Fed and stable book value. The bear case (25% probability) sees the stock falling to $19.39-$21, if the Fed turns hawkish or the dividend is cut. The most likely scenario is range-bound trading near current levels, with the dividend acting as a floor but limited upside.
Based on its trailing P/E of 7.66x and forward P/E of 7.65x, NLY appears undervalued relative to the typical mREIT range of 8-12x. The P/B ratio of 0.89x also suggests the stock trades below book value, indicating a discount. However, the low valuation reflects market concerns about book value volatility and dividend sustainability in a rising rate environment. Historically, NLY's P/E has ranged from 1.27x to 51.1x, so the current multiple is near the lower end, implying pessimistic expectations. Overall, the stock is likely undervalued if earnings stabilize, but the discount is warranted given the risks.
NLY offers a compelling dividend yield of 13.16% and trades at a low P/E of 7.66x, which may appeal to income investors. However, the stock carries significant risks, including high leverage (debt-to-equity of 6.95x), negative free cash flow of -$222 million, and sensitivity to Fed policy. The lack of analyst coverage (only 1 analyst) adds uncertainty. For risk-tolerant investors seeking high income, NLY could be a buy at current levels, but conservative investors should wait for signs of improved financial stability or a more favorable macro environment.
NLY is better suited for long-term income investors who can tolerate volatility, given its high dividend yield and low valuation. The stock's beta of 1.237 indicates higher volatility than the market, making it less suitable for short-term trading. The dividend yield provides a cushion, but the negative free cash flow and high leverage mean the dividend is not guaranteed. A minimum holding period of 3-5 years is recommended to ride out interest rate cycles. Short-term traders may find opportunities around earnings or Fed announcements, but the stock's underperformance relative to the market suggests caution.