Annaly Capital Posts Strong 2025 Finish, Citing Favorable Markets and Strategic Execution
NEW YORK – Annaly Capital Management (NYSE: NLY), a leading mortgage real estate investment trust, reported a strong finish to 2025, with fourth-quarter results bolstered by a stabilizing interest rate landscape and disciplined portfolio management. The company's performance underscores its resilience in a market transitioning from the volatility of recent years.
CEO David Finkelstein pointed to a "supportive macroeconomic backdrop" characterized by lower rate volatility and strong technical factors in mortgage markets. He noted that despite a temporary government shutdown disrupting some data, underlying economic fundamentals, including a softening but stable labor market, remained constructive for Annaly's investment strategies.
The company posted an economic return—a key metric for REITs that includes both income and changes in book value—of 8.6% for the quarter and 20.2% for the full year. Book value per share rose to $20.21, a 5% sequential increase. Crucially, Earnings Available for Distribution (EAD) of $0.74 per share continued to cover the quarterly dividend of $0.70.
"Our results reflect the benefit of a steepening yield curve and significant capital raising throughout the year," said CFO Serena Wolfe. Annaly raised $2.9 billion in equity in 2025, supporting a 30% expansion of its investment portfolio while maintaining what Wolfe termed "historically low" economic leverage of 5.6x.
Portfolio Performance in Focus
The company's three-pronged investment approach showed uniform strength. Its core Agency mortgage-backed securities portfolio grew to a $93 billion market value, benefiting from strong demand and limited supply. The residential credit segment, including its Onslow Bay lending franchise, saw record origination volumes. Meanwhile, the Mortgage Servicing Rights (MSR) portfolio expanded to a $3.8 billion market value, with Annaly solidifying its position as a top buyer in the conventional MSR market.
Looking ahead, Finkelstein signaled a strategic patience. While Agency spreads have tightened recently, lower volatility should help contain hedging costs. Management indicated a gradual shift in capital allocation over the longer term toward a greater mix of residential credit and MSR, aiming for a rough balance of 50%/30%/20% across its three strategies.
On the dividend, a focal point for income investors, management expressed confidence. "Given our balance sheet positioning and the fact we out-earned the dividend this quarter and expect to do so again next quarter, we feel the dividend's safe here," Finkelstein stated.
Market Reaction & Analyst Commentary
The report was met with cautious optimism from observers. "Annaly has navigated the rate transition adeptly," noted Marcus Thorne, a portfolio manager at Cedar Rock Advisors. "The book value growth and dividend coverage are positive signals, though the pace of future returns will hinge on the Fed's path."
Rebecca Shaw, a senior analyst at Finley Research, offered a more measured view: "The capital raising is impressive, but it's dilutive. The real test is whether they can deploy that capital at similar or better spreads in a more competitive environment. The shift toward credit and MSR is logical but carries different risks."
A more critical voice came from Leo Garner, an independent banking blogger. "Another quarter of celebrating book value gains fueled by equity raises," he remarked. "The dividend yield looks safe precisely because it hasn't grown meaningfully. Shareholders are paying for stability, not growth, and the stock often trades like a bond proxy with more complexity."
As one of the largest mortgage REITs, Annaly's performance is often viewed as a barometer for the sector's health. Its ability to generate income in a potentially declining rate environment, while managing prepayment risks in its massive mortgage portfolio, will remain under intense scrutiny as 2026 unfolds.