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There are 2 articles on this stock available only to PRO subscribers.
ARMOUR At Risk Of Losing Shareholder Interest If Strategy Not Changed
- ARMOUR’s third quarter earnings failed to meet analyst expectations.
- Management continues defensive approach in third quarter as well.
- Interest rates expected to remain stable; management needs to take advantage of low interest rates.
- End of quantitative easing program is not a concern for RMBS companies.
ARMOUR Residential REIT: Don't Be Fooled By The 15% Yield
- ARR sees both its core income and book value per share drop in Q3 2014.
- This was despite the leverage ratio ticking higher.
- ARR remains a high-risk play in an already high-risk sector.
15.1% Dividend ARMOUR Residential REIT Performed Poorly In Q3 2014
- ARMOUR Residential REIT pays a great 15.1% dividend. However, this may be in jeopardy with Core Income of only $0.13 in Q2 and Q3 2014, but dividends of $0.15 each quarter.
- ARR lost book value from $4.90 as of June 30, 2014 to $4.58 on September 30, 2014. This was -6.5% for Q3 (-26.1% annualized). It was terrible.
- Many other metrics were negative as well, such as a rise in the CPR from 5.12% to 7.46%. ARR just looked ugly.
Breaking Down The Quarterly Report Of Armour Residential REIT
- Company's own large hedge fund to offset interest rate hike dragging profitability.
- Armour reported taxable income of $49 million, $0.13 per share, for the quarter.
- Company’s $15.5 billion investment portfolio with leverage ratio at 8.42 to 1.
Update: Armour Residential REIT Reports Q3 Earnings - My Take
- Armour Residential REIT just reported Q3 earnings of $49.0 million, or $0.13 per share.
- I predicted key metric improvement, but the key metrics I follow all declined quarter-over-quarter.
- I won't let one bad quarter change my thesis, and thus I remain bullish on the stock under $4.00 per share.
Oversold, 15.4% Dividend Payer Armour Residential REIT Looks Attractive
- ARR pays a fantastic 15.4% annual dividend.
- The dividend appears to be stable, although the Core Income of $0.13 per share in Q2 did not fully cover the $0.15 dividend.
- ARR has already declared the same $0.15 per share dividend ($0.05 per month) for Q4 2014.
- Interest rates have been relatively stable for Q3 with the 10 year US Treasury Note yield ending Q2 at 2.53% and ending Q3 at 2.49% (a 4 bps difference).
- The Q2E 2014 book value of $4.90 probably decreased to roughly $4.86 per share. This is almost 25% higher than the $3.90 stock price on October 6, 2014.
- Armour Residential REIT has been under extreme selling pressure in the last month.
- I have avoided this stock for years.
- The stock has stabilized in 2014.
- Despite not covering dividends entirely in Q2, the company is maintaining its dividend through 2014 suggesting upcoming earnings will be strong.
- Read why I recommend this stock for the first time.
- Armour is seeing its core income come under pressure.
- The company failed to cover its dividend during Q2.
- At current prices, Armour yields 15% and trades at a 18% discount to book value.
ARMOUR Residential REIT's Staggering Yield May Be A Risk Worth Taking
- ARMOUR's weighted average maturity is increasing in recent quarters.
- ARR is trading substantially below its book value of $2 billion.
- ARR's dividends have gone down year after year, but are at an appealing 14.35%.
- ARMOUR has been taking the right steps by repositioning its investment portfolio and adjusting its hedge positions to protect book value.
- Core EPS will benefit in the future from ARR's measures to reposition its portfolio.
- ARR has the option to undertake share repurchases.
Continuation Of Defensive Approach In 2Q Forces Change Of Thesis On ARMOUR From Bullish To Neutral
- Core EPS pressurized by high hedging costs and lower asset yield.
- Company should give up defensive approach and take advantage of lower interest rates.
- Company offers exciting double-digit dividend yield with potential for modest price appreciation.
- The quarter was profitable and provides more opportunities in the future.
- Book value increased from $4.67 to $4.90 this quarter.
- Over 14% yield to take the cash or reinvest the dividends monthly.
14%+ Dividend Payer ARMOUR Residential REIT May Be A Bargain
- ARR grew its book value from $4.67 to $4.90 per common share in Q2 2014. This is a large discount to its stock price of $4.20 as of August 1.
- ARR pays a monthly $0.05 per common share dividend (about 14% annualized). The dividend appears to be stable.
- ARR has eliminated its longest dated fixed rate Agency RMBS. This makes it less susceptible to interest rate increases -- a more stable stock.
- Read the rest of the article for more details, if you are interested so far.
Investment In Armour Residential REIT Nets Profitable Double-Digit Gains
- ARR confirms $0.05 for third quarter dividends.
- Dividend over 14% and reinvesting dividends goes higher.
- Core Income was strong in first quarter and positive through second quarter.
- ARR expected to release second quarter financial report in August.
ARMOUR Stands Out With Significant Price Appreciation Potential And Attractive Dividend Yield
- Company has been taking the right measures in the ongoing industry environment.
- ARR has been repositioning its portfolio by favoring 15-year MBS to protect its book value.
- Portfolio repositioning should reduce rate sensitivity moving forward.
- Stock offers impressive total return of 23%.
14% Dividend, Likely Book Value Gain, Make ARMOUR Residential REIT A Buy
- The dividend for Q2 2014 has already been declared as $0.05 per month ($0.15 for Q2 2014). This is stable now for the third quarter in a row.
- The decrease in the yield for the 10 year US Treasury Note should mean a book value increase in Q2 2014 for ARR.
- The portfolio realignment in Q1 and Q2 2014 should make ARR's portfolio safer from interest rate increases going forward.
- The interest rates decreased in Q1 2014. Yet ARR lost book value. What will change that for ARR in Q2 2014 and future quarters?
- Company continues to be attractive after maintaining dividends.
- Macro-economic environment is stable and economic indicators are showing solid trends.
- ARR still needs to strike balance by managing risk and increasing asset yield.
Strength In ARMOUR Residential REIT's Portfolio - May 2014 SEC Filing
- ARMOUR holds over $16.7 billion in fixed rate securities and $192 million in ARM and hybrid securities.
- Leverage ratio has climbed to 8.2x to 1, as the company target is 8x to 9x to 1.
- ARR continues to repurchase common shares.
- Recommend ARR as a buy and hold long-term investment.
- ARMOUR Residential presented unconvincing first quarter results last week.
- As opposed to other mREITs in the sector, ARMOUR Residential's book value continued to slide.
- ARMOUR Residential is not a good choice for income investors. Short or Avoid.
There are no Transcripts on ARR.
Fri, Oct. 31, 10:07 AM
- Compass Point pulls the plug on its Buy recommendation on Armour Residential (ARR -0.5%) following the Q3 earnings report this week.
- Most metrics were soft, with core income failing to cover the dividend, book value falling, and net interest spread narrowing amid climbing prepayments.
- The current price of $3.95 is a 13.8% discount to Sept. 30 book value.
- Previously: Rising prepayments ding Armour Residential
Wed, Oct. 29, 5:16 PM
- Q3 core income of $49M or $0.13 per share vs. $50.9M and $0.13 in Q2. Quarterly dividends of $0.15.
- Book value per share of $4.58 slips from $4.90 at end of Q2. Today's close of $4.00 is a 12.7% discount to book.
- Net interest margin of 1.43% slips three basis points from Q2.
- CPR of 7.46% up 234 basis points from Q2.
- Leverage of 8.42:1 vs. 7.9:1 one quarter ago.
- Previously: ARMOUR Residential REIT misses by $0.02
- ARR -0.5% AH
- Previously: ARMOUR Residential REIT misses by $0.02
Wed, Oct. 29, 4:58 PM
Wed, Oct. 29, 1:43 PM
- Fed purchases of mortgage-backed securities are ending today, but reinvestments are likely to keep a firm bid in the market, says Deutsche's MBS team. The "real risk" to the MBS market won't come until the Fed ends reinvestments - early 2016 at the soonest, and maybe not until 2017.
- QE's end, says the team, leaves the Fed with $1.7T in MBS holdings and private investors with just $3.5T. The Fed's massive holdings - 1/3 of the universal amount, but 1/2 of dollar duration - keep a source of volatility out of the market.
- The end of the Fed as a net buyer will be about the first time since the early 1990s when MBS haven't been getting a bid from either the GSEs, Treasury, or Fed.
- ETFs" REM, MORT, MORL
- Names of interest: Annaly (NLY -1.6%), American Capital Agency (AGNC -2.5%), Armour (ARR -1.2%), Hatteras (HTS -1.6%), CYS Investments (CYS -1.7%)
Thu, Oct. 9, 10:40 AM
- It's been a good week for mortgage REITs (REM +0.7%) which rose on Tuesday as the broad market tumbled and brought yields down with it, rose more on Wednesday, this time alongside a major broad market rally on dovish FOMC minutes, and are on the move higher again today as the averages again head south.
- Down to 2.28% earlier in the session (a 16-month low), the 10-year Treasury yield is now flat on the day at 2.32%.
- This week's strong move comes following a tough September in which the mREITs gave back a nice chunk of their YTD gains.
- Annaly (NLY +1.2%) is up nearly 5% over the last four sessions. American Capital Agency (AGNC +1.5%) is ahead more than 6%.
- Others: Armour (ARR +1%), Chimera (CIM +1%), CYS Investments (CYS +1.2%), New York Mortgage (NYMT +1.3%), Anworth (ANH +0.8%), Dynex (DX +1%), Javelin (JMI +1.5%), Five Oaks (OAKS +0.9%).
- Other ETFs: MORT, MORL
Tue, Sep. 30, 3:05 PM
- Many in the sector (REM -0.9%) presented today at the JMP Financial Services and Real Estate Conference. Those heard in full by this reporter - CYS Investments (CYS -1.6%), Hatteras Financial (HTS -0.9%), and MFA Financial (MFA -1.3%) - presented nothing alarming, but the sector is nevertheless lit up bright red.
- Other presenters included Capstead Mortgage (CMO -1.2%), Arlington Asset (AI -2.2%), Dynex Capital (DX -1.7%), Invesco (IVR -1.2%), Armour (ARR -2%), New York Mortgage Trust (NYMT -3.2%), Javelin Mortgage (JMI -1.5%), Five Oaks Investment (OAKS -1.9%), and Apollo Residential (AMTG -1.1%).
- Related ETFs: MORT, MORL
- Previously: CYS's Grant not buying hawkish ideas from Fed
- Previously: Hatteras updates on Q3 at conference
- Previously: MFA Financial positions for further housing improvement
Thu, Sep. 18, 1:10 PM
- The entire sector is in the red, but the biggest declines are being seen in the industry giants, about the only spots large investors can move a lot of shares quickly: Annaly Capital (NLY -1.6%), American Capital Agency (AGNC -1.6%).
- Yesterday's FOMC statement may have left in the "considerable period" language, but the committee remains on course to begin a rate hike cycle in less than a year.
- Further, the selloff on the long end of the curve can has reached the sizable stage - the 10-year yield is up 32 basis points in a month, and has now erased about all of the summer's decline. Book values could take a hit (though hedging is likely to ease the pain).
- REM -0.7%
- Other ETFs: MORT, MORL.
- Other names: Armour (ARR -1.3%), Invesco (IVR -0.7%), Hatteras (HTS -3%), Capstead (CMO -0.3%), Western Asset (WMC -0.4%)
Fri, Aug. 1, 7:15 AM
- Core income of $50.9M or $0.13 per share vs. $58.3M and $0.15 in Q1. Quarterly dividends of $0.15.
- Book value per share of $4.90 up from $4.67. Last night's close of $4.21 is a 14.1% discount to book.
- Net interest margin of 1.46% slides 36 basis points from Q1.
- Leverage of 7.9:1 vs. 8.12:1.
- CPR of 5.12% vs. 3.68%.
- Previously: ARMOUR Residential REIT misses by $0.03
- ARR fell 0.5% AH last night.
Thu, Jul. 31, 5:06 PM
Mon, Jul. 7, 8:29 AM
- Both Armour Residential (ARR) and sister-company Javelin Mortgage (JMI) confirm their monthly dividends for Q3, Armour's payout being $0.05 monthly and Javelin's $0.15.
- Armour press release; Javelin press release
- Armour's dividend amounts to an annualized rate of 13.9% and Javelin's to 13%.
- Javelin is now lower by 2.5% premarket after the Citi downgrade.
Wed, May. 28, 2:43 PM
- The swoosh down in interest rates - the 10-year Treasury yield is now off 8 bps on the session to just 2.44% - isn't really boosting the mREIT sector (REM -0.1%), and one wonders which managements hunkered down for higher rates and now find themselves overhedged. There's also a flattening yield curve and it wasn't too long ago when the bear case on mortgage REITs was slimming net interest margin, not higher rates.
- Kudos to CYS Investment (CYS +0.5%) management, which - not finding a ton of value in mortgages - loaded up on Treasurys in Q1. The stock is one of the sector's stronger performers YTD, up 24.5%.
- Others today: Annaly (NLY +0.1%), American Capital (AGNC -0.7%), Armour Residential (ARR +0.7%), Hatteras Financial (HTS -0.3%), Capstead Mortgage (CMO -0.2%), Western Asset Mortgage (WMC -0.6%)
- ETFs: MORT, MORL
Thu, May. 15, 1:13 PM
- In the red along with the rest of the stock universe all session, a bit of green begins to creep into the mortgage REIT sector (REM -0.4%) as the 10-year Treasury yield tumbles below 2.50%.
- Annaly Capital's (NLY +0.1%) Q1 results were a notable disappointment as management seemingly found itself overhedged while rates fell sharply. One wonders if the hedges were lifted at all for Q2.
- The sector's best performer today is CYS Investments (CYS +1.1%). Management indicated on the April 22 earnings call that it thought mortgages were too pricey, so instead had put a slug of money into Treasurys - a move looking pretty good so far.
- Others: Two Harbors (TWO), Chimera Investment (CIM +0.2%), Armour Residential (ARR -0.1%), AG Mortgage Investment (MITT +0.1%)
- ETFs: MORT, MORL
Mon, May. 5, 8:21 AM
- Core income of $58.3M or $0.15 per share compares to $59.3M and $0.15 in Q4; $0.15 quarterly dividend.
- Book value per share of $4.67 slips from $4.75 after payment of $0.15 in dividends. Friday's closing price of $4.25 is a 9% discount to book.
- Leverage of 8.12x up from 6.92x; average net interest margin of 1.82% up 22 basis points; average CPR of 3.68% slips from 4.8%.
- Repurchased 600K shares at average price of $4.31 each.
- Source: Press Release
- ARR no trades premarket
Tue, Apr. 29, 12:12 PM
- The mortgage REIT (REM -0.9%) sector is lower following American Capital Agency Q1 results from after the bell last night. Earnings beat expectations and comfortably covered the $0.65 dividend, but a 2.3% gain in book value may have been somewhat shy of what was hoped for.
- Opinions make markets, and - unlike CYS Investments' management - American Capital CIO Gary Kain does not view the current mortgage market as too pricey to play in.
- Also for fixed income investors to chew on is Apple's upcoming (bell-ringing?) massive debt offering.
- Related ETFs: MORT, MORL.
- Other agency (or mostly so) MBS names: Annaly (NLY -0.7%), Armour (ARR -0.1%), Hatteras (HTS -0.1%), Capstead (CMO), Anworth (ANH -0.2%), Ellington Residential (EARN -0.6%).
Fri, Apr. 25, 4:43 AM
- The amount that lenders originated in mortgage loans plunged 58% on year Q1 to a 14-year low of $235B, almost entirely due to drop in refinancing. The figures are from industry newsletter Inside Mortgage Finance.
- Loans for acquisitions were flat on year and lower than in Q4.
- The trend is the latest indication that increasing interest rates are hampering the housing recovery. The average 30-year fixed-rate mortgage was 4.5% last week, up from 3.6% in May last year, when rates spiked after the Fed indicated it would scale back its QE program.
- Tickers: DHI, PHM, RYL, MHO, NVR, LEN, SPF, MDC, HOV, TOL ORI, NLY, AGNC, MTGE, ARR, TWO, IVR, CMO, MFA, WMC, FMCC, FNMA, RDN, NMIH, ESNT, GNW
- ETFs/ETNs: ITB, XHB, MORT, MORL, REM, MORT, MORT
Thu, Apr. 24, 10:36 AM
- A check of the mortgage REITs (REM +0.1%) finds not a lot going on stock price-wise following the first Q1 earnings reports from the sector this week (CYS Investments and Hatteras). As expected, book values grew and prepayments remained at a low level.
- Perhaps unexpected was a good deal of caution from CYS management about mortgage prices - right now, it's finding better value in Treasurys, and awaits a pullback in MBS prices before boosting those holdings. "The mortgage market is a little kid playing with matches," said CEO Kevin Grant on the earnings call (transcript). "We just don't know when everybody's fingers are going to get burnt. The traders that play in this market, they know this and they know they are playing with matches."
- Amid the low supply of MBS out there, Hatteras (HTS +0.1%) management on its call (transcript) says it now has 10 originators delivering wholesale product to the company covering more than half of monthly cash flow needs. Up next is expansion into jumbo ARMs.
- Other sector ETFs: MORT, MORL
- Individual names: Annaly (NLY +0.6%), American Capital (AGNC +0.7%), (MTGE +0.2%), Armour (ARR +0.1%), Two Harbors (TWO -0.6%), Invesco (IVR -0.1%), Capstead (CMO +0.3%), MFA Financial (MFA +0.1%), Western Asset (WMC +0.5%).
ARR vs. ETF Alternatives
ARMOUR Residential REIT Inc invests in and manages a leveraged portfolio of residential mortgage backed securities. The Company is externally managed by ARMOUR Residential Management LLC, pursuant to a management agreement.
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