Why Annaly Capital's Hedging Strategy Could Be the Key to the Next 12 Months

Mortgage real estate investment trust (REIT) Annaly Capital (NYSE: NLY) has a shockingly large 12.9% dividend yield. For reference, the S&P 500 index (SNPINDEX: ^GSPC) has a yield of just 1.1% today. The average REIT has a yield of 3.6%. If you are looking at Annaly's juicy yield today, you need to be worried about interest rates.While consumers appear to be worried about a recession, tightening their budgets, inflation is running hot. Rising inflation could force the Federal Reserve to increase interest rates. A key part of Annaly Capital's business model is to borrow money short-term so it can buy long-term mortgage securities. If rates rise, the company's interest costs go up even though its interest income doesn't change. That would leave less money to pay dividends.Image source: Getty Images.Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool