14% Dividend ARMOUR Residential REIT Should Surprise Many With Its Q4 2014 Performance
- ARR pays a great 14% dividend, although this could be in for a further cut with the still falling interest rates.
- ARR has already declared a $0.04 per common share per month dividend through March 2015 ($0.12 per common share for Q1 2015).
- ARR management bought back about 4.2 million of its own shares in Q4 2014. This indicates that the shares were very undervalued. They are more undervalued now.
- ARR likely gained book value in Q4 2014. Read more to get the details. ARR appears to be a huge value bargain.
ARMOUR Residential REIT: A 20% Dividend Cut Just In Time For The Holidays
- ARR lowers its dividend by 20% to $0.04 per month.
- This cut was expected, given consistent declines in core income.
- At current prices, ARR yields around 13%.
Update: My Reaction To ARMOUR Residential REIT's Dividend Cut
- ARMOUR Residential REIT has just announced its latest dividend payments.
- I previously opined that I was comfortable with the company keeping its dividends intact. I could not have been more wrong.
- I am downgrading the stock.
Q4 Looks Like A Better Quarter For ARMOUR Residential REIT
- ARR pays a 15.9% annual dividend.
- ARR may see an approximate +3.4% gain in book value in Q4 2014.
- ARR may also unfortunately see a cut of its dividend to $0.04 per month per common share from $0.05.
Proof ARMOUR Residential REIT Is A Positive Investment
- Combined stock price and dividend payouts, the stock is increased value 8.25% this year.
- Fourth quarter’s financial report should reflect similar profits, but we do not expect any catch-up dividend this year.
- 2015 will be different, and after the interest rate hikes, should be more profitable.
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 Residential REIT: A 15% Yield With Outsized Risk
- 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%.
There are no Transcripts on ARR.
Sep. 18, 2013, 5:42 PM
Sep. 18, 2013, 2:29 PM
- Most stocks are partying in wake of the Fed not commencing its QE taper today, but one sector of note is the beaten down mortgage REIT (REM +2.8%) group.
- Annaly (NLY +3.2%), American Capital (AGNC +3.5%), (MTGE +2.4%), Armour (ARR +3.4%), Two Harbors (TWO +3.4%), CYS Investments (CYS +3.7%), Anworth (ANH +2.8%), Western Asset (WMC +2.2%), Javelin (JMI +2%), AG Mortgage (MITT +2.1%), Arlington Asset (AI +1.6%).
- Yesterday, KBW called out CYS Investments as one of the more aggressive plays for those believing rates might head lower.
- ETFs of note: MORT, MORL.
Sep. 17, 2013, 12:53 PM
- MLV Capital initiates coverage on some names in the mREIT sector, starting Dynex (DX +1.9%), Armour Residential (ARR +0.6%), and Hatteras (HTS +1%) all with Buys.
- Dynex: The stock is still in the "penalty box" after the company reported a surprisingly high 15% decline in Q2 book value. Focused on rising long-term rates, investors are ignoring mitigating factors like slower prepayment speeds. Earlier: Dynex cuts its dividend in Q3.
- Armour: The stock trades at a 26% discount to book and yields nearly 21%. Even a 30% cut in the dividend only brings the yield down to 15%. The discount to book and massive yield seem to have priced in the company missing a margin call or two.
- Hatteras: "The company is being punished for doing all the right things," says MLV, though in the next sentence the team reminds book value plummeted 21% in Q2. Like with Dynex, the market is too focused on rates, and not slowing prepayment speeds.
Sep. 16, 2013, 1:32 PM
- "The stock prices do not fully reflect the risks to the agency mortgage REIT model," writes Sandler O'Neill in its downgrade of American Capital (AGNC -1.2%) and Armour Residential (ARR +0.4%). The risks:
- Price volatility in MBS, the overhang of what the Fed might do with $1.3T of MBS on its balance sheet, other MBS owners could become sellers - namely mutual funds and other mREITs, retail skittishness could widen discounts to book value even further, and the transition to a new Fed chairman.
- While not cutting earnings estimates, Sandler does cut AGNC's price target to $21 from $25, and ARR's to $3.50 from $4.50.
- The average book value/share of agency mREITs fell 4.5% in Q1, 14.7% in Q2, and "we don't think all the volatility is behind us." Book value could fall another 10-25% if some of the above risk factors play out. Additionally, Sandler expects the agency mREITs to trade at a 10-20% discount to book as long as the overhang of the Fed being a seller remains.
- Earlier: The downgrade and Compass One's differing opinion.
- Related ETFs: REM, MORT, MORL.
Sep. 16, 2013, 12:07 PM
- There's another Buy rating in the mREIT sector from Compass Point, with the firm upping Armour Residential (ARR +0.7%) to Buy with $5 price target. Earlier, the research firm raised Western Mortgage to Buy, and initiated a number of other non-agency players at Buy.
- Armour Residential is notable among this group for being the only pure-agency mREIT.
- Sandler O'Neill sees Armour differently, downgrading to Sell.
- The bond market continues to have a big day with the 10-year yield off 8 basis points to 2.82%.
Sep. 16, 2013, 8:48 AM
- Compass Point upgrades Western Asset Mortgage (WMC) to Buy with $17.50 price target.
- Shares +2.5% premarket, but it's likely more about Summers withdrawing from the Fed chairman's race. NLY, AGNC, ARR, IVR, and TWO are all up more than 2% in early action.
- Earlier: Compass point initiates coverage on several non-agency mREIT names, starting them all at Buy.
- Related ETFs: REM, MORT, MORL.
Sep. 11, 2013, 10:30 AM
- Trading at about 10% discounts to book, Gundlach thinks the mREITs (REM +0.2%) offer value, but he doesn't expect much price appreciation in the near-term. His favorites are the agency players as he believes they'll outperform over an entire cycle.
- He mentions Annaly (NLY +0.9%) specifically as a both a well-run mREIT and a good proxy for the entire sector. Even should the annual dividend drop to $1 (vs. $1.60 now), it's still near a 9% yield, he says.
- Last night's webcast.
- Late August: Gundlach turns bullish on mREITs
- Other ETFs: MORT, MORL.
- Other agency players: AGNC, ARR, HTS, CYS, CMO.
Sep. 3, 2013, 12:17 PM
- Armour Residential (ARR -2.9%), CYS Investments (CYS -2.3%), and Hatteras Financial (HTS -2.5%) are leading the mREIT sector (REM -1.3%) lower as interest rates again move sharply higher.
- Other movers include Annaly (NLY -1.6%), Western Asset (WMC -1.5%), and Ellington (EARN -2.2%), (EFC -2.1%).
- Other ETFs: MORT, MORL.
- Still occasionally lumped in with mREITs, specialty mortgage servicers gain as the market now realizes the value of MSRs increases as rates move higher (fewer prepayments). Ocwen (OCN +4.1%), Nationstar (NSM +2.4%), Walter Investment (WAC +1.8%).
Aug. 29, 2013, 1:02 PM
- In a major about-face, Jeff Gundlach turns bullish on the mortgage REIT sector (REM +0.7%), telling CNBC he spots value as many are trading at 10% or more discounts to net asset value. He specifically mentions Annaly (NLY +1.3%) as being a buy. Reported book value as of June 30 is $13.03 vs. the current price of $11.50.
- Other popular names trading at big discounts (though not mentioned by Gundlach): AGNC, ARR, IVR, HTS, CYS, CMO, MTGE, DX, WMC, JMI, EARN, to name a few.
- Other mREIT ETFs: MORT, MORL.
- He's also a fan of closed-end income funds trading at wide discounts to NAV. None are mentioned, but PDI, PFN, and PFL come to mind. DoubleLine's own DBL is trading right about at NAV.
- Of Apple's (AAPL +0.6%) big run to $500? "All the easy money has been made ... It's kind of dead money."
Aug. 20, 2013, 10:50 AM
- Sector giants Annaly (NLY +3.3%) and American Capital Agency (AGNC +4.3%) are the leading gainers, followed but Armour (ARR +2.6%), MFA (MFA +2.7%), Dynex (DX +2.8%), New York Mortgage (NYMT +3.3%), and Western Asset (WMC +2.8%) as interest rates take a breather from going up.
- Earlier: This year's Treasury bear market may be the worst one yet.
- Especially ugly trade in the preferreds of many of the agency mortgage REITs have some traders wondering if retail panic isn't ringing a bell for a bottom in the sector. Today, the action isn't necessarily ugly, but it is sloppy - with different preferreds of the same issuer (Armour, for example I, II) trading in different directions even as both represent the same credit risk.
- ETFs: (REM +2.4%), (MORT +2.7%), (MORL +5.8%).
Aug. 19, 2013, 3:09 PM
- A solid selloff in mortgage REITs (REM -3.7%) turns into a rout as the 10-year Treasury yield takes out another 2-year high at 2.89%. Looking at the short end, September 2015 Eurodollar futures at 98.65 are pricing in more than 100 bps of rate hikes between now and then.
- American Capital (AGNC -5.8%), Armour (ARR -7.5%), Apollo (AMTG -4.9%), Ellington (EARN -4.8%), Anworth (ANH -5.5%), Western Asset (WMC -5.7%), Arlington Asset (AI -4.7%), Dynex (DX -5.1%), Newcastle (NCT -2.3%).
- Mentioned before as starting to look very cheap, Annaly (NLY -4.9%) losses deepen with the stock at $10.72 - its lowest price since 2001 (the dividend fell to $0.25 at the end of 2000 before rising to $0.68 by the start of 2002).
- Tumbling income funds include (KFN -2%), and (PTY -2.1%).
- Among equity REITs, Realty Income (O -1.8%), Medical Properties (MPW -2.4%), and Simon Property Group (SPG -1%) lead down, but HCP (HCP +0.6%) remains green.
Aug. 19, 2013, 10:04 AM
- One trader takes note of Annaly Capital (NLY -2.1%) - it's fallen through the 2008 panic low all the back to 2005 levels hit amid a prolonged rate hike cycle and when the dividend had to be cut to $0.10 (it was $0.40 last quarter).
- Others of note: Armour (ARR -1.9%), CYS Investments (CYS -2.4%), AG Mortgage (MITT -2%), Capstead (CMO -1.3%), Javelin (JMI -2.3%), American Capital (MTGE -0.9%).
- Related ETFs: REM, MORT, MORL.
Aug. 16, 2013, 1:24 PM
- It's thin trading conditions, but the 10-year Treasury yield jumps 9 bps all of a sudden to 2.86%, touching a new 2-plus-year high. This despite weaker-than-expected consumer and housing data this morning.
- TLT -0.8%, TBT +1.7%.
- The move is taking a toll on stocks, where the S&P (SPY -0.4%) has slipped more than half a percent off the session high.
- The mortgage REITs (REM -1.7%), (MORT -1.5%), (MORL -3.5%) quickly react to the downside. Leading are: Armour (ARR -2.9%), CYS (CYS -4.2%), Javelin (JMI -3.5%), Hatteras (HTS -2.3%), (MFA -2.6%), Annaly (NLY -1.9%), American Capital (AGNC -1.8%), Dynex (DX -1.4%).
Aug. 7, 2013, 9:10 PM
- The resignation of Jordan Zimmerman from Armour's (ARR) board makes the company deficient in meeting Section 303A.01 of the NYSE Listed Company Manual which requires a majority of independent directors on the board of directors.
- Armour notes Zimmerman's resignation - effective August 2 - was not the result of any disagreement with the company.
- If Armour is not able to cure the deficiency by August 12, it will be deemed non-compliant and a below compliance ("BC") indicator will be attached as an extension to the company's stock symbol.
- The board is in the process of finding an independent candidate to fill the vacancy left by Zimmerman. (PR)
Aug. 1, 2013, 5:01 PM| 12 Comments
Jul. 31, 2013, 10:23 AM
- The good vibes from American Capital Agency (AGNC -2.7%) and American Capital Mortgage (MTGE -1.4%) earnings are somewhat snuffed out by rising Treasury yields which have returned to about their highs of early July following strong ADP and GDP prints this morning.
- The 10-year Treasury yield is up 7 bps to 2.69%.
- Both AGNC and MTGE rallied along with the rest of the mREIT sector (REM -1.5%) on smaller-than-expected Q2 book value declines, but rising bond yields could lead to further drops in Q3 (though Gary Kain made the case for his portfolios being well-hedged).
- Annaly (NLY -1.7%) - reports tonight, Armour (ARR -1.4%), Invesco (IVR -2.3%) - reports tomorrow morning, Two Harbors (TWO -1.9%), MFA Financial (MFA -3%), Capstead (CMO -2.2%), CYS Investments (CYS -2.4%), Hatteras (HTS -1.7%).
- MTGE earnings last night.
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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