Compass Point Reiterates a 'Neutral' on ARMOUR Residential (ARR); Dividend Concerns? A Short Idea?

Compass Point reiterates a 'Neutral' on ARMOUR Residential (NYSE: ARR) price target of $7.00.

Analyst, Jason Stewart, said, " We remain generally constructive on levered mortgage investing based on a few key macro premises. The yield curve is still historically steep and the Federal Reserve has committed to keep short term interest rates well anchored through YE14. Equity and credit considerations continue to be a major factor muting overall Agency prepayments. ARR's portfolio, which is largely comprised of shorter duration assets and is well hedged, should generate steady returns once fully seasoned. However, the company will be challenged to keep the payout at $0.30/quarter as prepayment rates increase throughout the remainder of 2012."

"Given the reasonable valuation compared to peers and monthly payout, investors should be cautious shorting ARR shares right now. However, we would use the periods in between capital raises to rotate into other mortgage REIT investment opportunities we believe have a more favorable risk versus return profile."

Stewart maintains Q4 EPS estimate at $0.27 and FY13 at $1.08, both below consensus.

For an analyst ratings summary and ratings history on ARMOUR Residential click here. For more ratings news on ARMOUR Residential click here.

Shares of ARMOUR Residential closed at $7.33 yesterday.

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