Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

The company elected to be taxed as a real estate investment trust (REIT). As a REIT, the company is not subject to federal corporate income tax, provided it distributes at least 90% of taxable income to stockholders. It was formerly known as Annaly Mortgage Management, Inc. and changed its name to Annaly Capital Management, Inc. in August 2006. Annaly Capital Management was incorporated in 1996 and is based in New York City.

That's right. The yield is 14.5% at this writing. As all investors know, the higher the dividend yield, the higher the risk. Here's what makes NLY riskier than most.

First, it funds the purchases for its holdings by borrowing money. As long as interest rates stay low, the spread between where it borrows and how much it earns will stay relatively high. Right now, short term rates are very low and have been for quite some time. It looks like they'll stay that way. Interest rate futures suggest that maybe rates will begin to rise in late 2012. The futures reflect investors' best guess as to what the Federal Reserve will do. Currently, the futures don't believe the Fed will tighten until late next year. The bellwether to watch is the overall economy. If that begins to strengthen, futures expectations will change and short term rates will move up sooner and faster than currently is expected.

When that happens, and it surely will since interest rates go in cycles and we've been at the bottom end of this cycle for some time, the spread between where NLY borrows and what it receives from investments will narrow. That means lower income and lower pay outs.

At the moment, NLY is buying mostly U.S. agency mortgage securities. That means it's picking up Ginnie and Fannie Mae bonds as well as Freddie Mac's. The charter for NLY requires it to take minimal credit risk which means almost all of its portfolio is made up of U.S. agency paper. That puts risk for an investor (and the company) on interest rates.

Recently the company sold 180 million shares to raise about $3.0 billion. Management figures interest rates will stay low for some time, and the spreads will remain wide. Investors agree. They bought the new shares and even pushed the price up a little after the sales. There could be more stock sold soon as the spreads remain wide, and management wants to take full advantage of them.

On the negative side: other investors are buying mortgage backed securities. Lots of them. You couldn't give them away 3 years ago because of all the mortgage turmoil. Times have changed. Institutional investors are looking to put cash to work. Mortgage backed securities still give a relatively good yield. But that yield is going down as more money pours into the market. That means lower yields for everyone.

The dividend this year is scheduled to be $2.60. Last year it was $2.76. The year before that: $2.29. In 2008, $1.92. In 2007, it was 89 cents. You can see the magnitude of change that investors can expect. While the current payout is higher than earnings, keep in mind that it's cash flow that pays dividends. And cash flow is ample to pay for these. Dividends are paid quarterly at the end of January, April, July and October.

Essential numbers: Market Cap is $14.14 billion. Trailing P/E is 7 while Forward P/E is 7.23. Price to book is 1.12. Book value is $15.76. Operating margin for the last 12 months was 90.39%. Profit margin was 88.41%. Return on equity was 14.96%. Return on assets was 1.97%. There's $1.72 billion in cash for $2.11 a share. Total debt is $81.52 billion (remember: this is a highly leveraged company). Beta is .23. In the last 52 weeks, the stock is down 2.22%. There are 813.26 million shars Outstanding with a Float of 809.4 million. Insiders own .44%. Institutions have 40.40% of the Float.

Investors looking for high yields won't find many higher than NLY. But there's a reason for that. When rates go up, the payout will go down. Right now it seems as if that won't happen for at least 12 to 18 months. But that can change quickly if the economy begins to recover in a meaningful way. If you like this stock, be sure you keep an eye on interest rates. Once they start going up, NLY will most likely start going down.