Credit: Shutterstock photoMortgage-based real estate investment trust (REIT) Annaly Capital Management, Inc. ( NLY ) on Wednesday announced a massive $1.5 billion stock repurchase plan.
The move is a rare one for REITs, and exceptionally so for mortgage REITs, which almost never buy back their own shares. In contrast, REITs normally sell additional shares in order to fund and expand their operations.
The timing of the buyback is also strange, considering NLY just filed to sell 125 million additional shares back on March 19. Seemingly, the funds generated from that sale will now be used to buy back some of the shares the company just recently released.
Annaly noted the planned buybacks will occur over a twelve-month period, with purchases made on the open market or in privately negotiated transactions.
Annaly Capital shares rose 26 cents, or +1.6%, in morning trading Wednesday.
The Bottom Line
Here at Dividend.com, it's no secret that we dislike share buybacks. We feel they offer little to no value to shareholders whatsoever. Generally, repurchases like the one NLY just announced are used to help bolster a stock's share price, pad its EPS results (less outstanding shares means high earnings per share), and in come cases, allow insiders to exercise selling options. We much prefer companies distribute excess capital to shareholders through dividends, or use the cash to expand their businesses.
Annaly Capital Management, Inc. ( NLY ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.3 out of 5 stars.
Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
