SOURCE: Paragon Financial Limited

Paragon Financial Limited

November 23, 2011 08:16 ET

Obama, Congress and the Fed All Team Up to Threaten Annaly and CYS Investment's Dividends

Paragon Report Provides Equity Research on Annaly Capital Management & CYS Investments

NEW YORK, NY--(Marketwire - Nov 23, 2011) - Shares of high yielding Real Estate Investment Trusts (REITs) have been volatile in recent months. While the favorable interest rate spreads have benefitted the sector, mortgage REITs -- like the rest of Wall Street -- have been challenged by investor anxiety over the European debt crisis. Moreover, potential measures being proposed by Congress and the Obama Administration could potentially weigh on the industry's profits -- and dividends. The Paragon Report examines the outlook for diversified REITs and provides equity research on Annaly Capital Management, Inc. (NYSE: NLY) and CYS Investments, Inc. (NYSE: CYS). Access to the full company reports can be found at:

The Obama administration's latest plan to help underwater homeowners refinance turned some investors away from mortgage REITs. Mortgage prepayments are known to crimp mortgage REIT earnings. Mortgage REITs make money on the spread between interest rates on short-term debt that they use to buy higher-yielding, long-term mortgage securities. By purchasing bonds guaranteed by the government, analysts argue these companies take on no risk of default, with the principle concern being an interest rate risk.

The Paragon Report provide investors with an excellent first step in their due diligence by providing daily trading ideas, and consolidating the public information available on them. For more investment research on diversified REITs register with us free at and get exclusive access to our numerous stock reports and industry newsletters.

According to a recent article from Forbes, Agency mREITs as a group outperformed the S&P 500 in the third quarter. A set of the 7 most actively traded Agency REITs lost just over 6 percent (including dividends) compared to a 14 percent loss for the S&P 500. Net Interest Margins for the sector were under pressure in the most recent quarter as longer-term investment rates fell following implementation of Operation Twist, which led to a modest downturn for some dividends in the sector. Operation Twist was aimed at reducing the cost of borrowing for businesses and consumers, including the cost of mortgage loans, by lowering long term interest rates.

CYS Investments invests on a leveraged basis in residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. The Company declared a common dividend of $0.55 per share with respect to the third quarter of 2011, compared to $0.60 per share for the second quarter of 2011.

Currently Annaly Capital Management yields approximately 14.9 percent. Annaly, the largest mortgage-backed securities real estate investment trust, swung to a $921.8 million loss, or 98 centers per share, in the third quarter.

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