On Tuesday, after the markets closed, Annaly Capital Management (NLY) announced plans to repurchase up to $1.5 billion of its outstanding common shares over a 12-month period.
This is a noticeably different and quite contrary move compared to the standard serial secondary stock offerings made by most mortgage REITs. The news is likely to immediately benefit Annaly's shares, as there is a new buyer in town.
During the last few quarters, as interest rates declined, most mortgage REITs have noticed declining spreads and rising prepayment rates. This makes it difficult for an mREIT to maintain its dividend, or it forces the management to buy riskier securities and/or institute higher leverage rates in order to increase profits. Such endeavors generally substitute one risk for another.
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