ARMOUR Residential (NYSE: ARR) reported fourth-quarter 2012 results lower than expected, and its EPS of $0.22 per share was $0.05 per share lower than consensus estimates.
For the quarter, ARMOUR earned 2.47% in yields on its MBS portfolio, which is 23 basis points lower than the preceding quarter. The cost of funding was up 4 basis points to 0.92%, resulting in a net interest rate spread of 1.55% which is lower by 27 basis points sequentially.
By comparison, and in contrast to most companies in this sector, American Capital showed an increase in its net interest rate spread by 21 bps to 1.63%. The stock offers an attractive dividend yield of more than 14% and is currently trading at an 11% discount to its book value. The stock is attractively priced based on valuation. I recommend buying ARMOUR Residential