No. of Recommendations: 2
A couple of years ago (2002-03) NLY had to cut their dividend because all the refi's were killing the returns on their higher yielding CMOs. Their stock price plummeted as a result, but soon recovered.

The main risk with NLY is the way they use the yield curve to make money (borrowing at short term rates and lending at long term rates). I would be concerned that the flattening yield curve will make it hard for them to maintain their high dividend. If you believe that long term rates will soon go up faster than short term rates, then a company like NLY would be a good investment.

They are an interesting and fairly well run operation, but I suspect that the flattening of the yield curve will continue for some time (contrary to popular opinion), so I'd be concerned about the sustainability of their dividend and share price.

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