ARMOUR Residential REIT, Inc. (NYSE:ARR)’ book value armor eroded by QE


Dallas, Texas 09/10/2013 (Financialstrend) – ARMOUR Residential REIT, Inc. (NYSE:ARR) is one company that has definitely seen better times. It was one of the most sought-after stocks for income-oriented investors. Its monthly dividends and high yields had a definite attraction quotient.  At the start of the year many analysts had commented on the stock and also warned investors to avoid ARR since it had been underperforming in comparison with its peers and also since it was using excessive leverage.

This sort of hit the nail on the head as since then the company’s stock price has taken a 35% plunge. This has been attributed to a major extend to the impending Fed Tapering.

The company has also announced monthly-dividends of $0.07/share right through September. This equates with a 20% yield at the current prices.

 Battered book value

ARR’s book value has been completely destroyed in the recent quarters. In the 2012 Q3 what was a high of $7.77/share has now moved down to $5.43/share. This is a massive 30% plunge. This drop is largely due to the company’s leverage and the premiums that were paid out for mortgage backed securities. Of course, ARR is not the only mREIT that has been battered. Almost all the mREIT’s have met with the same fate as the present day treasury market is absolutely at its lowest levels since 1994.

The effect

It is not very easy to estimate what the company’s current book-value is. In most probability, it has dipped from the 2013 June book-value of $5.43 with MBS prices on the decline. However, recently, they have started becoming a bit decouples from the treasury prices.

The book values of mREIT’s are as a rule, affected by various news events. At the moment, it seems like ARR’s book-value is above its current share-price.

Typically, the net interest spread-time in how mREIT’s make money. Unfortunately for its stakeholders, ARR”s NIM has dropped to a great extent in 2013.