Which REIT Fits Your Investment Style: Annaly Capital or Realty Income?

Understanding Your Dividend Preferences

Before diving into dividend data and selecting between two major REITs, investors must first identify their core objectives. Are you seeking maximum current income, or would you prefer steady growth over time? Do you value payment frequency—monthly deposits versus quarterly distributions? These questions fundamentally shape whether Annaly Capital Management (NYSE: NLY) or Realty Income (NYSE: O) aligns better with your portfolio strategy.

Both qualify as REITs, meaning they’re legally obligated to distribute at least 90% of their taxable income as dividends to shareholders. Yet despite this similarity, these two real estate investment vehicles operate in entirely different markets and deliver vastly different return profiles.

Annaly Capital: High Yield, Volatile Income

Annaly Capital Management, headquartered in New York, ranks among America’s largest mortgage-backed REITs. Rather than purchasing physical properties, Annaly focuses on mortgage-related securities—including mortgage pass-through certificates and collateralized mortgage obligations.

The company’s primary business unit, Annaly Agency Group, manages $87.3 billion in assets within the mortgage-backed securities (MBS) sector. Its investments span residential and commercial mortgages backed by government entities including Fannie Mae, Freddie Mac, and Ginnie Mae. Beyond MBS operations, Annaly maintains a mortgage servicing division and residential credit segment providing direct financing to homeowners. Cumulatively, the company has financed over 1 million residential properties.

Recent dividend data reveals the appeal: Annaly’s quarterly dividend of $0.70 per share produces a substantial 12.6% yield—nearly double the stock market average. The company reported a $97.8 billion investment portfolio with a $19.25 book value per share. However, this attractive headline yield masks a critical weakness: Annaly slashed its dividend by 26% in 2023 and 12% in 2020, reflecting interest rate sensitivity inherent to mortgage securities.

Realty Income: Consistency and Growth

Realty Income takes a fundamentally different approach, owning and managing over 15,500 commercial properties across all 50 U.S. states, the United Kingdom, and seven European nations. Its tenants span multiple sectors—from Dollar General and Walmart to CVS Health and Wynn Resorts.

The company’s diversified portfolio breakdown includes:

• Grocery stores: 10.8%
• Convenience stores: 9.7%
• Home improvement stores: 6.4%
• Dollar stores: 6.2%
• Quick-service restaurants: 4.8%

Third-quarter performance showed adjusted funds from operations of $1.08 per share, up from $1.05 year-over-year, on revenue of $1.47 billion. While Realty Income’s 5.6% dividend yield trails Annaly’s, the company distinguishes itself through monthly payouts—providing 12 distributions annually instead of four quarterly checks.

More importantly, Realty Income has increased its dividend for 133 consecutive months, with an unbroken track record of payments spanning 666 consecutive months. Over five years, the company grew its dividend 46%—a sharp contrast to Annaly’s 42% dividend reduction over the same period.

The Dividend Data Tells the Story

When analyzing dividend data comprehensively, two decisive factors emerge. First is dividend trajectory: Annaly’s high yield masks deteriorating shareholder income, while Realty Income compounds wealth through consistent increases. Second is payment frequency: monthly distributions enable reinvestment opportunities four times more often than quarterly alternatives, allowing investors to harness compound growth faster.

For income-focused investors prioritizing steady cash flow over maximum current yield, Realty Income’s combination of growth and monthly payments typically proves superior. For speculators accepting volatility in pursuit of maximum headline yields, Annaly Capital may hold appeal—though recent dividend cuts suggest caution.

The choice ultimately depends on your investment timeline, risk tolerance, and whether you seek immediate high income or compounding wealth growth.