Armour Residential REIT
The company reported core income of $18.6 million, and book value for the quarter came in at $7.14, just below the company's share price. The company also reported an interest rate spread of 2.36% for the quarter, a 4 basis point downturn from the first quarter.
Investors need to keep an eye on the trend in interest spreads, since it signals the health of the company's business. Armour's performance is more or less in line with that of peers, although spreads did drop at some competitors.
|
Company |
Q2 Spread |
Q1 Spread |
|---|---|---|
| Armour | 2.36% | 2.40% |
| Annaly | 2.45% | 2.17% |
| Chimera | 4.20% | 4.71% |
|
American Capital Agency |
2.46% | 2.58% |
|
Cypress Sharpridge |
2.23% | 1.83% |
Source: Capital IQ, a division of Standard & Poor's.
The company maintained a debt-to-equity ratio of 879% for the quarter, which is high relative to peers, but it's exactly that leverage that allows the company to pump out that generous 19.7% yield.
|
Company |
Debt-to-Equity |
Yield |
|---|---|---|
| Armour | 879% | 19.7% |
| Annaly | 577% | 14.9% |
| Chimera | 189% | 17.4% |
| American Capital Agency | 739% | 19.9% |
| Cypress Sharpridge | 745% | 19.0% |
Source: Capital IQ, a division of Standard & Poor's.
In the quarter, Armour raised millions more in capital through a share issuance, following a path that Annaly, Chimera, and Invesco Mortgage Capital
Foolish bottom line
With unemployment staying at high levels and interest rates remaining low, business conditions look favorable for Armour. That was underscored by comments from Annaly and Chimera earlier in the week. Annaly's CEO stressed that the sector would continue to see favorable operating conditions for a "significant period of time." So things look solid gold for Armour in the near future, and that's just the kind of news that dividend investors want to hear.
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