Annaly Capital Management, Inc. (NYSE:NLY) will be reporting first-quarter earnings soon, when investors will get a glimpse of how 2013 has been treating the mega mortgage REIT. With that in mind, I thought it would be a good idea to take a look even further ahead in the year, since several political issues are on tap that concern mREITs in general, and Annaly in particular.
So, without further ado, here are three factors that I feel might trip up Annaly Capital Management, Inc. (NYSE:NLY) later this year.
1. Concerns about an mREITs bubble
Regulators have been peering at mREITs for some time, wringing their hands over the amount of assets they own and worrying that a failure of these trusts might put the economy at risk. Recently, these trusts were on the agenda of the Financial Stability Oversight Council, as that body considers various financial entities that could pose a threat to the economy.
2. Congress is eyeballing the REIT sector’s special tax status
The U.S. Congress is currently going over the tax code with a fine-tooth comb looking for loopholes, and the REIT industry’s special tax status is coming under review. Though The Wall Street Journal notes that a change in the law that allows REITs to avoid corporate taxes on income as long as they pay out 90% of earnings isn’t certain, neither is it out of the realm of possibility — possibly making dividends like those paid by American Capital Agency Corp. (NASDAQ:AGNC) and its hybrid cousin American Capital Mortgage Investment Crp (NASDAQ:MTGE) a lot less hefty.
3. Shareholders may balk at Annaly’s new management paradigm
Annaly’s management will have a big question for its stockholders at this year’s annual meeting, asking for their blessing to segue from being an internally managed company to using an external management team — one made up of the very people that now rule the roost.
Of course, many mortgage REITs are externally managed, such as the aforementioned American Capital Agency and American Capital Mortgage Investment Crp (NASDAQ:MTGE). However, this proposal seems to behoove Annaly Capital Management, Inc. (NYSE:NLY)’s management more than its shareholders — and, as my colleague John Maxfield has pointed out, will also protect the board members from having to publicly disclose their salaries. If a large enough contingent of investors questions the wisdom of this move, the meeting could turn into a rumpus that could damage Annaly’s credibility.
This latter scenario will play out next month, while the political issues will likely take longer to simmer. Meantime, Annaly continues to work on its acquistion of CreXus Investment Corp (NYSE:CXS), the purchaser of commercial mortgage-backed securities that Annaly hopes will help relieve some of its QE3-inspired malaise. If there is one thing Annaly Capital Management, Inc. (NYSE:NLY) investors can count on, it is that the rest of 2013 won’t be boring.
The article 3 Things That Could Hobble Annaly Capital originally appeared on Fool.com.
Fool contributor Amanda Alix has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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