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Armour Residential REIT: Don't Trust The Yield

Published Fri, 22 May 2020 13:09:47 -0400 on Seeking Alpha

Company paid $0.17 per share monthly distribution on March 27, 2020.
On April 2, 2020, ARMOUR announced a shift to a quarterly distribution for the second quarter.
On May 19, 2020, management accounted for a second quarter distribution of $0.09 and a resumption of monthly cash distributions in the third quarter.
Brokers and financial websites are calculating the yield incorrectly.
For most of the financial industry, but especially the mortgage REIT sector, the end of the first quarter was an absolute nightmare. Credit markets began to freeze up, and even though the Federal Reserve had lowered the Fed funds rate, everywhere else rates began to spike.
Even though the Treasuries market is supposed to be the most liquid market in the world, problems began to arise. Reuters used the phrase, "The plumbing behind world's financial markets is creaking." Within days, headlines claimed the U.S. was headed towards another financial crisis. Across the board, there were calls for the Federal Reserve to do something. And do something they did.
It would take an entire series of white papers to go over the special programs and facilities launched or expanded by the Federal Reserve in response to the markets. Some of the actions taken include the purchase of mortgage-backed securities, agency mortgage-backed securities, agency commercial mortgage-backed securities, agency debt securities, and an expansion of repo and reverse repo agreements. A short list of the facilities is presented below:
Term Asset-Backed Securities Loan Facility Commercial Paper Funding Facility Primary Dealer Credit Facility Primary Market Corporate Credit Facility Secondary Market Corporate Credit Facility Margin Calls
As a whole, Mortgage REITs use leverage in order to increase income. Normally, this is not a problem because they are structured so that interest payments are less than the marginal income received from the borrowing. Think of it working in the same way as... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
TWO HARBORS INVESTMENT 13.28   0.0 -2.81 1.60 12.02


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