Annaly Capital Management (NLY) is seeing modest gains today thanks to better-than-expected earnings for the fourth quarter of 2016. The mortgage Real Estate Investment Trust (REIT) saw EPS of 30 cents, a penny above expectations thanks to GAAP net income of $1.79 per share.

The income came despite volatility in interest rates, which CEO Kevin Keyes emphasized in a statement. "The fourth quarter of 2016 was yet another period of historically high market volatility with interest rate levels rising meaningfully and credit spreads contracting significantly,” he said. “Once again, amidst this uncertainty, Annaly delivered stable core earnings and dividends producing an attractive return on equity for our shareholders. In addition, the effectiveness of our diversification and hedging strategies contributed to our book value for the quarter outperforming expected changes despite the pronounced sell-off in the fixed income markets."

Unlike equity REITs, mortgage REITs earn their income from borrowing at low interest rates and investing in mortgages or mortgage-backed securities. Wild fluctuations in interest rates can make REITs profit margins vary wildly, resulting in periods of extreme profitability and massive losses. (See also: Equity and Mortgage REITs.)

Annaly Capital is one of the oldest and most experienced firms in this sector, but the stock's long-term performance has been pressured by historically unprecedented monetary policies from the Federal Reserve. Over the last five years, NLY shares are down 36.5 percent, although shares have improved by 7.9 percent over the last year.

At the same time, the firm's regular dividend has declined 45 percent over the last five years from 55 cents per share to 30 cents per share. NLY's dividend has stayed at 30 cents since the end of 2013.

The future of NLY's dividend remains unclear, although it remains lower than the firm's 53 cents per average common share core earnings. NLY also noted annualized core return on equity of 10.13 percent, down slightly from 10.3 percent a year ago. The mREIT's book value also declined from 11.73 per share at the end of 2015 to 11.16 per share at the end of 2016.