Can Annaly Capital Management's Reduced Dividend Be Sustained?

In response to a more adverse business environment, Annaly Capital Management, Inc. (NLY) has been reducing its dividend: Figure 1: NLY dividends The most recent dividend announcement occurred on December 18, 2012, and the amount was reduced from $0.50 for 3Q12 to $0.45 for 4Q12 (payable 12/24/12). NLY currently yields ~12.2%. However, investors familiar with my approach know the first question I ask is what portion, if any, of the dividends I am receiving are really "earned". I am leery of investing in entities (publicly traded partnerships or companies) that pay dividends, or fund distributions, by issuing debt or additional equity. In taking a closer look at NLY I encountered difficulties similar to those I faced when reviewing the performance of MLPs. Since money is fungible and NLY's annual report runs over 100 pages that are frequently hard to understand, ascertaining whether you are genuinely... Read more