Which High-Yield Financial Stock Is the Safer Buy: Annaly Capital Management or Starwood Property Trust?
2026-07-21 17:30
•Matt Dilallo •The Motley Fool
•••••• •••••• Axe Capital view
Which High-Yield Mortgage REIT Deserves Your Rand?
Annaly offers steadier income, but Starwood’s growth potential makes it a mixed bag for income hunters here in South Africa.
South African investors chasing high yields should look carefully before diving into US mortgage REITs like Annaly Capital Management and Starwood Property Trust. Annaly stands out for its improving earnings—distributable income per share has risen steadily, comfortably covering its generous 12.5% dividend yield. That kind of income stability is rare and aligns with risk-conscious investors, especially when rand weakness can amplify foreign income. Starwood, on the other hand, while never having cut its 11.6% dividend in 17 years, currently pays out more than it earns. This payout gap raises red flags, although its acquisition strategy may boost earnings later. Given the rand’s vulnerability to US dollar strength, locking in reliable distributions from a stable payer like Annaly feels safer. Still, if you’re betting on Starwood’s growth story, be ready for volatility and yield pressure. this is just my opinion and not financial advice
Tilt towards Annaly for steady income and safer dividend coverage. Keep Starwood on watch for recovery signs before committing capital.
- NLY
- STWD
- USD/ZAR
- Starwood’s dividend coverage may worsen if acquisition benefits are delayed
- Rand strength could erode US dollar-based income gains for South African investors
7/10
Annaly Capital Management and Starwood Property Trust are two mortgage REITs offering double-digit yields (12.5% and 11.6% respectively). Annaly is deemed the safer income play due to its growing earnings that support recent dividend increases, while Starwood, despite never cutting its dividend in 17 years, currently has distributable earnings below its dividend payout. However, Starwood expects improved coverage from its Fundamental Income Properties acquisition.
This article was originally published by The Motley Fool and has been adapted here for Axe Capital Trading News.
Publisher: The Motley Fool
Author: Matt Dilallo
Categories: Rates, Equities, Earnings, M&A, Capital Returns, Financials
Tickers: NLY, NLYPF, NLYPG, NLYPI, NLYPJ, STWD
Sentiment: Positive - Annaly demonstrates improving fundamentals with earnings available for distribution rising from $0.64 to $0.76 per share, supporting two dividend increases in 18 months. Current earnings exceed the $0.75 quarterly dividend, indicating sustainable payouts. Diversified portfolio across Agency MBS, residential credit, and mortgage servicing rights provides flexibility and durable cash flows. Starwood has an impressive 17-year history of never cutting its dividend, but currently faces a coverage concern with distributable earnings of $0.39 per share falling short of the $0.48 dividend. However, the company has clear visibility to improved earnings through the Fundamental Income Properties acquisition and other catalysts, suggesting near-term challenges with longer-term improvement potential.
Keywords: mortgage REIT, dividend yield, earnings coverage, real estate investment trust, high-yield stocks, dividend sustainability
Insights:
- NLY: Positive: Annaly demonstrates improving fundamentals with earnings available for distribution rising from $0.64 to $0.76 per share, supporting two dividend increases in 18 months. Current earnings exceed the $0.75 quarterly dividend, indicating sustainable payouts. Diversified portfolio across Agency MBS, residential credit, and mortgage servicing rights provides flexibility and durable cash flows.
- NLYPF: Positive: Annaly demonstrates improving fundamentals with earnings available for distribution rising from $0.64 to $0.76 per share, supporting two dividend increases in 18 months. Current earnings exceed the $0.75 quarterly dividend, indicating sustainable payouts. Diversified portfolio across Agency MBS, residential credit, and mortgage servicing rights provides flexibility and durable cash flows.
- NLYPG: Positive: Annaly demonstrates improving fundamentals with earnings available for distribution rising from $0.64 to $0.76 per share, supporting two dividend increases in 18 months. Current earnings exceed the $0.75 quarterly dividend, indicating sustainable payouts. Diversified portfolio across Agency MBS, residential credit, and mortgage servicing rights provides flexibility and durable cash flows.