Is This 13% Dividend An Income Trap?

#1 AI stock trading for $3

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AI is by far the biggest tech investing trend of 2023. But Ross Givens says the #1 artificial intelligence stock is NOT Microsoft, Google, Amazon or Apple. Nope – his research is pointing to a tiny, under-the-radar stock that's trading for just $3 right now… And could soon shoot to the moon, handing early investors a windfall. This company already has 98 registered patents for cutting-edge voice and sound recognition technology… And has lined up major partnerships with Honda, Netflix, Pandora, Mercedes Benz and many, many others. So if you missed out on Microsoft when it first went public back in 1986… This could be your shot at redemption. Click here now for the full details of this $3 stock that's set to rocket in the AI revolution…


By The Motley Fool

At a time when the S&P 500 index is yielding just 1.5%, finding a stock with a yield of 12.8% might seem like finding a needle in a haystack. That lofty yield is exactly what Annaly Capital Management (NLY 1.16%) is offering investors today. But it is not a needle in a haystack or a diamond in the rough. If history is any guide, it could very well turn out to be a yield trap.

Here are three facts you need to know if you are considering buying Annaly today.

1. Annaly is not your typical REIT

As a real estate investment trust (REIT), Annaly is required to pass at least 90% of its income on to shareholders. That said, it does not do what most REITs do. A traditional REIT owns physical property and leases it out to tenants. That's a fairly simple business model designed to generate a consistent income stream. Instead, Annaly invests in mortgages.

Technically, mortgage REITs like Annaly usually buy bond-like securities that represent a pooled collection of mortgages, often called something like a collateralized mortgage obligation (CMO). CMOs do generate cash flows based on the payments on the underlying mortgages. However, there's a lot more going on than in a traditional lessee/lessor relationship. For example, CMOs trade openly so their value can change day to day, the price of a CMO will vary along with interest rates, and payment trends and housing market dynamics will also play a role in prices.

Then there's the fact that mortgage REITs like Annaly tend to use leverage to enhance returns. The portfolio of mortgages is often used as collateral for that leverage, which can be a problem if CMO values fall dramatically. But the end goal is to make more from the interest collected on the mortgage portfolio than it has to pay in interest on the leverage it has taken on. That's a spread trade, and it's very different from owning a physical property.

All told, if you want to buy Annaly, you'll need to take extra time to make sure you fully understand the business you are buying. It may not be what you think it is if you are used to buying property-owning REITs.

2. Annaly's yield isn't as great as it looks

There's risk with any stock investment, of course. And a high yield can be an indication that Wall Street isn't confident about a company's ability to pay its dividend. That's exactly how investors should view Annaly's huge 12.8% dividend yield. The proof is in the numbers.

The chart above is a bit busy, but it paints a very worrisome picture. The first line to consider is the orange one, which is the dividend yield. Notice that the yield has always been fairly lofty, usually above 10%. Yield is a simple math equation, taking the annualized dividend and dividing it by the share price. This is where the trouble begins.

The blue line represents Annaly's annual dividend. Notice that it has been trending lower for a decade. Given the equation above, the only way the yield can stay high under this scenario is if the stock price also declines, which is exactly what the purple line shows took place. If you are a dividend investor trying to live off of the income your portfolio generates, buying Annaly a decade ago would have left you with less income and less capital today. That's most certainly not the outcome you would have hoped for.

3. Annaly isn't really meant for small investors

By this point, most income-focused investors will probably understand why a mortgage REIT like Annaly isn't going to be a good buy candidate. But that doesn't mean that Annaly won't be appropriate for some investors. The key is that Annaly is a total return investment, which assumes the reinvestment of dividends.

As the chart above highlights, the stock price return was negative over the past decade. But if dividends were reinvested, the total return was positive. Annaly's function is to provide direct exposure to mortgages for investors that focus on asset allocation. That generally means large investors like pension funds and insurance companies that think in terms of total return, and not small investors looking to generate a reliable stream of dividend income.

Annaly is probably not going to be for you

At the end of the day, Annaly has a huge yield that will probably seem attractive until you dig into the backstory here. It is a complicated investment that serves a niche purpose that simply won't be appropriate for most investors. Tread carefully if you are thinking about buying Annaly because for years it has been little more than a yield trap for individual investors.


The “Second Nvidia” Is About to Soar

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The artificial intelligence (AI) boom just created one of the biggest companies in the world.

I'm talking about Nvidia. The firm is worth more than $1 trillion thanks to this explosion.

However, most people don't realize Nvidia just got lucky!

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In other words…

This technology was never meant to power AI.

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>>> Get the full story here while there's still time.

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ELON’S FINAL MOVE​

Elon’s new AI venture promises to create 10 TIMES MORE American millionaires than Tesla did.
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The 3 Titans of AI

Get ready to join the AI revolution! The unstoppable rise of artificial intelligence AI is taking the world by storm, transforming industries and reshaping the future. Excitingly, numerous companies are diving headfirst into this cutting-edge technology, pouring massive investments into AI to revolutionize their products, slash costs, and gain an unbeatable edge over the competition.

But wait, there’s more! Through meticulous research and rigorous analysis, I’ve uncovered the crème de la crème of the AI world. These three mighty AI behemoths are the crown jewels of the market, primed to ride the surging tide of AI adoption across industries.

Imagine the thrill of being part of their phenomenal growth story! Brace yourself for the exciting journey ahead as you invest in these AI Titans—the vanguards of innovation, the masters of AI mastery. They are set to unlock unparalleled opportunities and immense value for savvy investors seeking long-term prosperity.



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The 3 Titans of AI

Get ready to join the AI revolution! The unstoppable rise of artificial intelligence AI is taking the world by storm, transforming industries and reshaping the future. Excitingly, numerous companies are diving headfirst into this cutting-edge technology, pouring massive investments into AI to revolutionize their products, slash costs, and gain an unbeatable edge over the competition.

But wait, there’s more! Through meticulous research and rigorous analysis, I’ve uncovered the crème de la crème of the AI world. These three mighty AI behemoths are the crown jewels of the market, primed to ride the surging tide of AI adoption across industries.

Imagine the thrill of being part of their phenomenal growth story! Brace yourself for the exciting journey ahead as you invest in these AI Titans—the vanguards of innovation, the masters of AI mastery. They are set to unlock unparalleled opportunities and immense value for savvy investors seeking long-term prosperity.



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Bill Gates is all about this tiny $2 stock

According to Bill Gates… This company is working on a unique technological innovation that is going to change the world as we know it.

Powerful companies like Microsoft, Intel, and Google are all quietly racing to be at the forefront of this new phenomenon…

But it’s this tiny company who holds the keys to what could be a $7 Trillion Revolution…

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Free Access to Chaikin Analytics

Marc Chaikin has developed a system  over the past 50 years…

A website that shows you which stocks could soon rise by 100% or more, by typing in any of 4,000 tickers.

Today, he’s allowing me to offer you free access to the system here, as part of a major new prediction he’s making.

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Amazon Price Prediction

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Nvidia Price Prediction

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How to Collect "Amazon Royalty" Payouts Before the Deadline

Thanks to a little-known IRS loophole, regular Americans can collect up to $28,544 (or more) in payouts from what is called “Amazon’s secret royalty program”…
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New "Forever Battery" making gas cars obsolete​

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New EV Set to Disrupt Entire Industry

The Wall Street Journal calls it “an American manufacturing triumph.” – Will this disrupt the entire $1.3 trillion EV boom?


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Tiny TSLA Supplier To Soar

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Own This Texas Oil Stock Today

Texas Oil Stock to Benefit from Surging Gas Prices. Reveal the ticker by signing up below and you’ll receive ongoing updates from Market Junkie.



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$3.73 EV Stock No One's Talking About

This company is a sneaky EV play that no one’s talking about.

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$30 Stock Freaking Out Billionaires

This stock is an industry leader in a robotics technology that is freaking out billionaires (trading for just $30).

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The Best TaaS Stock Right Now

This company is set to corner the market in a self-driving technology that  could fundamentally change our entire society – much like the internet did.

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Up to 20,000 IPOs All in One Day

A radical $2.1 quadrillion shift is coming to the financial markets.

Some are calling it G.T.E. and Mark Cuban, Elon Musk, Richard Branson, and even banks like J.P. Morgan are invested in the tech behind it.

Just $25 could get you in alongside these billionaires. 

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53-cent Biotech Stock with $2 Price Target

Steve Cohen, the billionaire stock picker known for running one of the most successful hedge funds ever, has poured millions into the first stock, and it’s trading for only 53 cents.

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