Annaly's mortgage servicing rights shield dividend
The guest argued that Annaly Capital Management is well-positioned to maintain its dividend because its mortgage servicing rights (MSRs) gain value and throw off stable income as interest rates rise.
The argument
Higher rates reduce prepayment speeds on underlying mortgages, extending the duration and value of MSRs, which helps offset the pressure of rising short-term borrowing costs.
The thesis, stress-tested
✓ What validates it
- ✓Annaly maintains its 70-cent quarterly dividend through 2026
- ✓Prepayment speeds (CPR) remain low in earnings reports
▸ Risks discussed
- ▸Severe yield curve inversion eroding net interest margin
- ▸Short-term financing costs rising faster than expected
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