Investing

Three Numbers That Will Decide if Annaly’s Huge Dividend Survives

Annaly Capital's 16.9% yield has drawn income investors for years, but three specific metrics will determine whether that $3 annual payout holds or follows the same path as every previous cut in its history.

By Chris Lange
Published October 8, 2026, 2:45pm ET · 2 min read

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Annaly Capital (NYSE:NLY) pays $0.75 per quarter, or $3 a year. At $17.80, that yields a whopping 16.9%. The stock fell 18.87% over the past month. Annaly is a mortgage REIT that borrows short term through repurchase agreements (repo), buys mortgage securities, and keeps the difference between what the bonds pay and what borrowing costs. Three numbers decide whether the dividend holds up.

Spread Pays the Dividend, and Its Cost Resets Every Month

In Q2, Annaly’s agency portfolio had a weighted average coupon of 5.11%, repo rate of 3.84%, and net interest margin of 1.76%. Earnings available for distribution (EAD) were $0.79 per share, covering the dividend for the ninth consecutive quarter.

Repo loans averaged only 33 days to maturity, so rising short-term rates increase funding costs quickly. Annaly’s hedges cover 97% of that exposure. Management said:

“We expect to be able to cover the dividend over a period of time. There will be quarters where we’ll out earn it and maybe we might be on top or even a touch below.”

AGNC Investment (NASDAQ:AGNC) runs a wider 2.00% net interest spread but its repo matures in just 13 days.

Book Value Tells You Whether the Dividend Is Earned

Book value per share is the scoreboard. Annaly’s book value rose to $20.15 in Q2 from $19.82, after falling from $20.21 in Q1. The 10-year Treasury yield has climbed from 4.56% to 5.27%. Management said book value was off “a little over a percent”. Shares trade about 11.7% below the last reported book value, suggesting the market expects more erosion.

Leverage Multiplies Every Mistake

Annaly holds $143.74 billion in assets on $16.93 billion of equity. Economic leverage is 5.6x, and GAAP leverage is 7.4x. AGNC runs 7.4x on tangible book, and its tangible book fell 5.6% in Q1. Annaly’s CEO says the lighter balance sheet is an edge:

“It has contributed to our ability to generate double-digit economic returns while operating with less leverage than our peers.”

Rithm Capital (NYSE:RITM) spreads risk through origination, servicing, and asset management. It held its dividend at $0.25 on EAD of $0.60, though mortgage servicing marks cost it $194.5 million in Q2.

Annaly Has Cut Its Dividend Before

Annaly has cut its dividend before. The quarterly payout fell from $0.55 in 2012 to $0.30 by late 2013, from $0.30 in 2018 to $0.22 in 2020, and from $0.88 to $0.65 in 2023. Each cut followed narrowed spreads or book value losses (we listed the seven warning signs that tend to come before a cut like these in a free guide here). The current run of increases began in 2025.

Dividend Variability and the One Number to Track

Annaly’s dividend has historically moved with spreads and book value. That variability matters for anyone relying on a fixed check, as does the 18.87% monthly drop. Watch book value per share in the Q3 report against $20.15. If it falls while EAD just covers $0.75, the dividend is paid from capital.

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Chris Lange

Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.

His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.

When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.

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