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nnaly Capital Management delivers an unusually high dividend yield, far surpassing the roughly 1.2 % return of the S&P 500. The disparity is not a mistake; as a mortgage REIT, Annaly is legally required to distribute 90 % of its taxable income to shareholders. The company invests in agency mortgage‑backed securities—mortgage pools insured by entities like Fannie Mae—alongside non‑agency residential loans and mortgage‑servicing rights. These assets normally provide modest, low‑risk, fixed‑rate income, but leverage boosts Annaly’s overall returns into double‑digit territory.

    In Q3, earnings available for distribution (EAD) rose to $0.73 per share, up from $0.66 a year earlier, comfortably covering the $0.70 dividend. The EAD has hovered around $0.73–$0.72 in recent quarters, enabling the firm to lift its quarterly payout from $0.65 to $0.70 earlier this year. As long as EAD stays above the dividend level, the payment can be maintained, though it is sensitive to interest rates and market conditions. In 2022, EAD ranged from $0.89 to $1.22, supporting a $0.88 quarterly dividend.

    Because the payout is tied to earnings, investors should monitor EAD trends before seeking income. The Motley Fool discloses no positions in these stocks.

    While yield can be appealing, reliance on leverage and sensitivity to interest rates mean earnings—and dividends—can swing sharply. Investors should assess how changes in the mortgage market and rate hikes could affect future payouts.