I just noticed that the price of Annaly, the best virtual bank I've liked for a couple of years, has pulled back significantly after hours, by over 2%. It is currently trading at around $17.90. Likely you may see its price at around $17.70 tomorrow. As you may know, Annaly has been constantly over $18 in the past few weeks. So this pull back is kind of big drop for it. Why? Here is the reason: Annaly will issue 120 million common stock shares at a price of $17.70 per share and will use the proceeds to purchase mortgage-backed securities for its investment portfolio and pay down its short-term indebtedness. Issuing more stock shares in general is not a good thing for companies as it dilutes the value of the existing stock shares. So usually you will see a significant stock price drop when this happens. However, for the virtual banks such as NLY, it is not a bad thing when it is done at the right time. Remember, the business model for NLY is a REIT, for which it must pay 90% of its earnings as dividends to shareholders. Without much money left, it is difficult for it to expand its portfolio. So it must try to raise more money, usually by issuing more shares, to invest when it sees more opportunities. Annaly is good at that and I belive it is the right time for it to do so.
While I won't add more shares at this reduced price given I have already held a lot of its shares, it may be a good opportunity for those who are waiting for such a pull back to buy some shares to enjoy its 14%+ high and safe dividends.
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