NLY --- they have issued stock 4 times this year and they say it's been accretive to book value and earnings. It's very unusual to see that. You've got me curious as to what is under the hood.
The trailing and forward PE is in the 7 to 8 range, and yet we are seeing earnings growth numbers and the need for more several equity offerings.
The reason for the large earnings gain this past quarter is they had over 3 million in profit from the price appreciation of parts of their mortgage backed securities.
27% of their mortgage backed securities are fixed, depending on the duration of those securities, that component of their portfolio holding would probably underperform, if we saw a big jump in the entire yield curve.
The other parts of their portfolio is floating rate in nature and should be interest rate indifferent.
This is a very interesting stock. I'm thinking about buying some. I've not gone through the 10 K and so I'll look at that a bit.
The spread is going to narrow later this year, or next between the short end of the yield curve where NLY is getting their cost of funding , and the longer end of the curve where people are buying mortgages that are then being grouped into packages and then sold to institutional investors such as NLY. But the business model is not going away. Plus it seems like Investors always work on a delayed basis from when fundamentals turn and when it that turn shows up in the Quarterly Earnings.
The 13.69 yield is impressive.
I was talking with Michael Burke and we were commenting how you can still get a 20% return on your money, through dividends and price appreciation if you are looking at the right types of businesses.
This company is a good example of one of the type of stock sectors that does well in this type of environment.
(Stocks that do well when the interest rate spread between Fed Funds and 10 and 30 year interest rates are this wide.)
John
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Annaly Mortgage Management, Inc. Increases Net Income Per Share by 82% to $0.69 for the Quarter Ended March 31, 2002
Business Wire ~ April 26, 2002 ~ 4:02 pm EST
NEW YORK--(BUSINESS WIRE)--April 26, 2002--Annaly Mortgage Management, Inc. ( NYSE: NLY) today reported earnings per average share for the quarter ended March 31, 2002 were $0.69 per average share, an increase of 82% from $0.38 per average share for the quarter ended March 31, 2001.
Earnings for the quarter ended March 31, 2002 totaled $53,042,977, compared to $8,330,273 in the prior comparable quarter. Earnings per average share for the quarter ended March 31, 2002 increased 6% from earnings per average share of $ 0.65 for the quarter ended December 31, 2001. Weighted average shares outstanding were 76,709,836 and 21,851,481 for the quarters ended March 31, 2002 and 2001, respectively.
As previously reported, the Company completed an offering of common stock during the quarter issuing 23,000,000 shares, with net proceeds of $347 million. This was the fourth equity raise in a thirteen-month period. All of the offerings have been accretive to book value and earnings for existing shareholders.
For the quarter ended March 31, 2002, the yield on average mortgage-backed securities was 4.88% and the cost of funds on the <i/>average repurchase balance was 2.23%, which equates to an interest rate spread of 2.65%. This is a 52 basis point increase over the 2.13% interest rate spread for the quarter ended December 31, 2001, when the yield on average mortgage-backed securities was 4.77% and the cost of funds on the average repurchase balance was 2.64%, and a 155 basis point increase over the 1.10% interest rate spread for the quarter ended March 31, 2001, when the yield on average mortgage-backed securities was 6.78% and the cost of funds on the average repurchase balance was 5.68%.
For the quarter ended March 31, 2002, the Company's gain on sale of assets was $3,410,245, as compared to the prior year's first quarter of $269,478. General and administrative expenses, as a percentage of average assets, was 0.14% and 0.13%, respectively, for the quarters ended March 31, 2002 and 2001. Leverage at March 31, 2002 was 8.3:1 compared to 12.4:1 at March 31, 2001.
The Company provided an annualized return on average equity of 25.32% for the quarter ended March 31, 2002, as compared to 17.20% for the quarter ended March 31, 2001. Dividends declared for the quarter were $0.63 per share. The annualized dividend yield for the quarter, based on the March 28, 2002 closing price of $16.98, was 14.84%.
At March 31, 2002, the Company had a book value of $12.17 per share, which is a 9% increase from the December 31, 2001 book value of $11.15 and a 24% increase from the March 31, 2001 book value of $9.80. The Company classifies all investment securities as "available for sale;" therefore the Company is required to record the entire portfolio at market value. At March 31, 2002, the Company's portfolio was comprised of 27% fixed rate mortgage-backed securities, 40% adjustable rate mortgage-backed securities, and <b/>33% LIBOR floating rate collateralized mortgage obligations. The Company has continued to avoid the introduction of credit risk to its portfolio. As of March 31, 2002, all of the assets in the Company's portfolio were FNMA, GNMA or FHLMC securities, which carry an actual or implied "AAA" rating. As of March 31, 2002, all assets in the portfolio were REIT eligible assets.
The Company is a Maryland corporation which owns and manages a portfolio of mortgage-backed securities. The Company's principal business objective is to generate net income for distribution to stockholders from the spread between the interest income on its mortgage-backed securities and the costs of borrowing to finance its acquisition of mortgage-backed securities. The Company has elected to be taxed as a real estate investment trust ("REIT") and currently has 82,893, 452 shares of common stock outstanding.
The Company will hold the first quarter 2002 earnings conference call Monday, April 29, 2002 at 10:00 a.m. EST. The number to call is 1-800-388-8975. The re- play number is 1-800-428-6051 and the pass code is 240335. There will be a web cast of the call on www.annaly.com. If you would like to be added to the e-mail distribution list, please visit www.annaly.com, click on E-Mail alerts, enter your e-mail address where indicated and click the Subscribe button.
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the company website does a good job of outlining their business story on the front page
annaly.com
Annaly Mortgage Management is a public company traded on the New York Stock Exchange under the ticker "NLY"
The Company is organized as a real estate investment trust (REIT). REITs receive special tax treatment from the IRS. They do not have to pay corporate taxes on the money paid out as dividends to shareholders. This avoids the "double taxation" issue associated with most dividend payouts.
Our prime objective is to generate dividend income for our shareholders. Annaly acquires and manages mortgage securities,which can be readily financed in the repurchase markets. Dividend income is generated from the spread between the yield on our mortgage securities and the cost of borrowing to finance those securities.
Annaly's History
In February 1997, NLY raised $36 million in a 144A private placement
In March 1997, NLY paid its first dividend. NLY has provided a continuous stream of earnings and dividends since the company's inception
In October of 1997, NLY raised $100 million in an initial public offering and began trading on the New York Stock Exchange
In July 1999, NLY instituted a dividend reinvestment plan and a direct purchase plan. Stock can now be purchased directly from the company
In 2001, Annaly Mortgage Management raised capital in three different secondary offerings: $87.4 Million in January, $175.5 Million in April and $168 Million in September.
Our Basic Strategy
NLY raises money in the public markets to invest in REIT eligible assets, primarily mortgage-backed securities
We use moderate leverage to increase returns to our shareholders
We strive to be a low cost provider in order to increase shareholder value
How NLY Raises Money
With the help of Wall Street investment bankers NLY has raised $566.90 million through stock offerings
Investors buy stock directly from the company
Investors reinvest their quarterly dividends through our transfer agent Chase Mellon Shareholder Services
NLY's Assets - Mortgage-Backed Bonds
Mortgage-backed bonds are ownership interests in mortgage loans made by financial institutions (savings and loans, commercial banks and mortgage bankers). When an institution has made enough loans it will "pool" or package them together and sell them to mortgage investors. The institution will forward the principal and interest payments made by the homeowners to the mortgage investor. .... |
