ARR - Armour Residential: Why The 14.8% Dividend Yield Could Dip

2024-07-08 11:51:46 ET

Summary

• Armour Residential's dividend has declined by 61 cents per share since 2019, a 72% decrease over five years.
• The mREIT's book value has been decreasing, with the potential for more dilution as they continue to sell common stock.
• The preferred shares have offered a better total return over the last one, three, and five years compared to the common shares, making them a safer investment option.

Armour Residential's ( ARR ) dividend profile since the pandemic has been torrid. The mortgage REIT last declared a monthly cash dividend of $0.24 per share , unchanged from its prior payout and $2.88 per share annualized, for an immense 14.8% dividend yield. However, this monthly payout has been precarious, it was $0.85 per share before the pandemic in 2019, and has dipped by roughly 61 cents since then to its current level. The monthly payout stood at 40 cents per share in 2023. The broad 72% dividend decline in five years is material and raises the specter of ARR's current dividend being a suckers yield. Total return over the last year is also negative at 11.4% as the commons look towards pending Fed rate cuts for some relief....

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