December 19, 2011

My Investment in Annaly Capital Management (NLY)

About a year ago I bought some shares in Annaly Capital Management, Inc. (NLY).    NLY is a REIT that is highly leveraged and pays out a substantial dividend yield.

I bought 26 shares at a price of $18.35 per share.    The total investment was $477.10.     In the past year I've received dividend payments of $65.26 total. 
Today NLY is now trading at just $16.18.    Combining the dividend payments of $65.26 and the current capital value of $420.68 the value is now $485.94.   

In total I'm up roughly 1.8% for the year on the investment.

The S&P 500 went from 1258 to 1234 in the same period so its down marginally by about 2%.

The Vanguard REIT ETF (VNQ) is virtually flat as well going from 55.17 to 55.13.   But the ETF has paid out about $2 in that time.   So in total VNQ is up around 3.6%

Considering that the NLY is up only 1.8% and the Vanguard REIT ETF is up about 3.6% I don't consider my NLY investment a very good one. Buying the diversified ETF would have been a lot safer and it has performed better as well.

I decided to sell my shares of NLY.    When I bought the idea I had in my head was that I'd make >10% dividend and expected that the market value of the shares would likely stay flat.   I knew the investment was a little risky given how NLY operates.   But I figured (hoped) with a 10%+ dividend that it would be hard to go wrong.  I didn't figure or really expect the market value of the shares to drop like they did.  I don't consider this investment a success but on the other hand I didn't lose money.


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