Armour Residential's stock trades at a slight 2% premium to its book value. This is opposed to 6%, 7% and 17% premiums in case of MFA Financial, Capstead Mortgage Corporation and American Capital Agency (AGNC), respectively. The market caps of MFA Financial, Capstead and Armour Residential fall in the range of $1.4 billion-$2.9 billion, while American Capital Agency, like Armour Residential, exclusively invests in agency securities, which is why it has been chosen for the comparison.
Armour Residential REIT Inc. (ARR), like other mortgage REITs in the U.S., has been favored by the Fed's efforts to keep interest rates low. This is reflected by ARR's YTD performance of 4.4%. We are bullish on the stock due to its cheap relative valuations, effective risk mitigation strategies and its massive sustainable dividend yield of 16.4%.
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