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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 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.
There are no Transcripts on ARR.
Tue, Dec. 9, 12:57 PM
- Unable to catch a bid for a few sessions, mortgage REITs (REM +1%) have turned higher in afternoon action, led by Annaly (NLY +0.7%) and American Capital Agency (AGNC +1.5%).
- Helping are jitters in the stock market (though U.S. averages are well off the lows), and a 10-year Treasury yield that's retreated all the way to 2.21% after hitting the mid-2.30s on the back of Friday's strong jobs number.
- Armour (ARR +1.1%), Two Harbors (TWO +0.9%), CYS Investments (CYS +1.4%), Invesco (IVR +1.8%), American Capital Mortgage (MTGE +1%), Hatteras Financial (HTS +2%), Capstead (CMO +2%).
- Other ETFs: MORT, MORL
- Also showing some green are the recently beaten-up BDCs, including Prospect Capital (PSEC +0.2%), Fifth Street Finance (FSC +0.2%), Ares Capital (ARCC +0.5%), FS Investment (FSIC), Triangle Capital (TCAP +1.7%).
- ETFs: BDCL, BDCS, BIZD
- Previously: Money flows back into fixed income (Dec. 9, 2014)
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%)
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
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. 4, 3:15 PM
- What's working today? With the exception of Western Asset Mortgage which had a massive secondary offering, the mREIT sector is nearly universally higher as money rushes out of the previously perkier areas of the market.
- Not hurting is a seven basis point decline in the 10-year Treasury yield to 2.73%.
- Up the most are the two largest and also investor favorites Annaly (NLY +1.4%) and American Capital Agency (AGNC +1.3%). Others: CYS Investments (CYS +1%), American Capital Mortgage (MTGE +0.5%), MFA Financial (MFA +0.5%), Dynex (DX +0.9%), Armour (ARR +0.5%).
- Related ETFs: REM, MORT, MORL
Wed, Mar. 19, 3:13 PM
- A check of sectors following the FOMC statement and updated projections suggesting a quickened pace of rate hikes in the future finds the banks and life insurers notably moving higher. Both groups have struggled earning a spread amid ZIRP and are positively levered to higher rates.
- Lenders: Bank of America (BAC +1%), Citigroup (C +1%), JPMorgan (JPM), Regions (RF +1.7%), KeyCorp (KEY +0.9%), SunTrust (STI +0.7%).
- Life insurers: MetLife (MET +1%), Prudential (PRU +0.7%), Lincoln National (LNC +1%).
- Related ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, KIE, SEF, IYG, IAK, FXO, PFI, KBWB, FNCL, FINU, RWW, RYF, PSCF, KBWP, KBWI, FINZ, KBE, KRE
- Not necessarily positively levered to higher rates are the mortgage REITs (REM -1.6%): Annaly (NLY -1.8%), American Capital (AGNC -1.7%), (MTGE -1.9%), Armour (ARR -1.3%), Two Harbors (TWO -2%) CYS Investments (CYS -3.3%), Capstead (CMO -1.3%), MFA (MFA -1.8%).
- Related ETFs: MORT, MORL
Thu, Mar. 13, 3:16 PM
- Ports in a storm on a tough day for the major averages (S&P 500 -1.4%), the mREIT sector is mostly in the green, with sector giants Annaly (NLY +1.1%) and American Capital (AGNC +1.1%) leading the way.
- The 10-year Treasury yield is off eight basis points to 2.65%.
- Earlier: Dividend hikes at mREITs? Capstead (CMO +0.9%) and Ellington Residential (EARN +1.9%) boost payouts by 10%.
- Others: Armour (ARR +0.9), CYS Investments (CYS +0.9%), Dynex (DX +0.8%).
Fri, Mar. 7, 12:46 PM
- The mortgage REITs are maybe the poorest performing sector amid a big move higher in interest rates, and formerly bullish Deutsche Bank ringing the register on New York Mortgage Trust, CYS Investments, and American Capital Mortgage after nice runs for all have pulled them close to (or above in NYMT's case) book value.
- There's also an earnings miss this morning from one of the last of the players to report Q4, Western Asset Mortgage.
- Annaly (NLY -2.1%), American Capital Agency (AGNC -2.3%), Armour (ARR -1.4%), Two Harbors (TWO -1.8%), Invesco (IVR -2.7%), Capstead (CMO -1.2%), MFA Financial (MFA -2%), Apollo Residential (AMTG -1.7%)
Thu, Mar. 6, 7:12 AM
- Armour Residential (ARR) increases the size of its buyback authorization to up to 50M shares. It was previously $100M, or about 23M shares at the current price.
- Thomas Guba - who has served on the board since 2009 - is appointed lead independent director. Among other responsibilities, Guba will coordinated the activities of the other independent directors, including having the authority to call executive sessions of the independent directors.
- Press release
- Shares +1.4% premarket
- Javelin Mortgage announced nearly identical moves today as well.
Wed, Feb. 26, 9:58 AM
- A check of the mREIT sector (REM +0.8%) following better-than-expected Q4 results from Annaly finds about all the individual names in the green.
- Like many earlier reporters, Annaly experienced a pleasing drop in prepayments during Q4, leading to a widening net interest margin.
- American Capital Agency (AGNC +0.8%), Armour Residential (ARR +0.9%), CYS Investments (CYS +0.6%), Hatteras Financial (HTS +0.9%), Dynex (DX +1.1%)
- ETFs: MORT, MORL
- Annaly's earnings call begins shortly. The stock is up 3.5% in early action.
Tue, Feb. 4, 11:51 AM
- Addressing an analyst cadre somewhat uncomfortable with American Capital's (AGNC +1.6%) new policy of purchasing the common stock of its agency mREIT competitors (Wells' Joel Houck: Do you know their hedging strategies? What happens when one blows up?), CIO Gary Kain says the discounts to asset value are so great as to mitigate much of the risk.
- Kain does acknowledge some risks though, and reminds that the purchase program is but a small slice of AGNC's overall portfolio ($400M of others' stock bought so far vs. nearly $600M of AGNC buybacks just in Q4).
- For now, there won't be any disclosure of which names American Capital is buying - a position also not sitting well with those on the call. Should the positions get large enough though, regulatory filings might be required.
- Kain also reminds that AGNC isn't just boosting risk with these purchases - instead it's selling MBS at 100 cents on the dollar to buy them back (via other mREITs) at somewhere in the area of 80 cents on the dollar.
- Most of the mREIT sector (REM +0.7%) is ahead again today - Armour (ARR +0.9%), CYS (CYS +2.8%), Hatteras (HTS +1.6%), American Capital Mortgage (MTGE +0.6%), PennyMac (PMT +1.2%) - but Annaly (NLY -0.6%) lags, perhaps as investors feel it was far more conservatively positioned going into 2014 than AGNC was.
- Earnings call is still ongoing
- Previous coverage
Thu, Jan. 30, 10:20 AM
- You're seeing a lot of demand in the assets we hold, says Capstead Mortgage (CMO +1.5%) management on the conference call after reporting a blowout Q4. In a steepening yield curve environment - the short-end anchored while long rates move higher - Capstead is benefitting from tightening spreads in the 5/1 ARMs it mostly holds.
- Mr. Market seems to have fleshed this out, and Capstead was already trading for right around book value (reported at $12.47 as of Dec. 31) vs. the double-digit discounts for long-end players like Annaly (NLY +0.2%), American Capital (AGNC -0.3%), Armour (ARR), and CYS Investments (CYS -0.5%).
- Another in the adjustable-rate arena is Hatteras Financial (HTS +1.5%).
- Related ETFs: REM, MORT, MORL
Wed, Jan. 29, 3:15 PM
- For the most part, the mREIT sector (REM -0.2%) is getting little boost from another big swoosh down in interest rates - the 10-year Treasury yield off 7 basis points to 2.69%. Confused about how to play the dislocations caused by massive QE purchases of MBS, mREIT managements are likely similarly confused about how to play the taper (another $10B reduction today).
- Peeking into the green in afternoon action are Annaly (NLY +0.9%), Chimera (CIM +0.8%), and American Capital Agency (AGNC +0.2%), but Armour (ARR -0.7%), Invesco (IVR -1.2%), American Capital Mortgage (MTGE -1.2%), Hatteras (HTS -1.7%), and Western Asset (WMC -2.6%) are nicely lower.
- Capstead Mortgage is set to be the first of the mREIT to report Q4 results after the bell today.
- ETFs: MORT, MORL
Fri, Jan. 10, 11:18 AM
- It's a big dip in interest rates today (the 10-year yield off 8 bps to 2.88%), but buyers are doing little more than tiptoeing back into beaten-down mortgage REITs.
- Leading are Annaly (NLY +1.3%) and American Capital (AGNC +1.4%), (MTGE +1.1%), and Armour (ARR +0.7%), CYS Investments (CYS +1.2%), and Invesco (IVR +1.1%) are also posting decent gains. All are quietly up in the area of 5-10% off of their 52-week lows set late last year.
- Related ETFs: REM, MORT, MORL
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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