ARMOUR Residential REIT, Inc.: Lock in an 11.3% Yield (Paid Monthly) by January 13?
Looking for Oversized Monthly Dividends? Read This
In today’s zero-interest-rate environment, few things look more enticing than a high-yield, monthly dividend stock. With this type of stock, investors not only get to earn oversized dividends, but also get to be paid on a monthly basis—as opposed to having to wait three months for a quarterly dividend.
ARMOUR Residential REIT, Inc. (NYSE:ARR) happens to be one of those high-yield, monthly dividend stocks. The company will be mailing out another round of distribution checks very soon. Investors who want to get their names on the distribution list may want to act quickly.
Allow me to explain.
As its name suggests, ARMOUR Residential REIT is a real estate investment trust (REIT). The company focuses on the residential mortgage side of the real estate business. It invests exclusively in residential mortgage-backed securities (MBSs) that are issued or guaranteed by U.S. government-sponsored enterprises or by the Government National Mortgage Association. These securities are commonly referred to as agency MBSs.
According to ARMOUR Residential’s latest investor presentation, as of December 2020, 100% of its portfolio was invested in agency MBSs, including “to be announced” (TBA) securities. (Source: “ARMOUR RESIDENTIAL REIT, Inc. Company Update,” ARMOUR Residential REIT, Inc., December 11, 2020.)
Of course, given the COVID-19 pandemic and its impact on the economy, mortgage REITs were not in the best of shape in 2020. And many investors learned the hard way that dividends are not carved in stone.
In the case of ARMOUR Residential, the REIT started 2020 with a monthly dividend rate of $0.17 per share. In April, management said the company would move to a quarterly dividend schedule. (Source: “ARMOUR Residential REIT, Inc. Announces Company Update and Dividend Information,” ARMOUR Residential REIT, Inc., April 2, 2020.)
The good news was that things didn’t get much worse from there. In May, management said the company would resume its monthly dividends. Even though the payment was at a lower rate of $0.09 per share, the dividend reduction wasn’t an unusual decision, considering the industry-wide downturn.
Better yet, in June, the company decided to increase its monthly dividend payout to $0.10 per share. (Source: “ARMOUR Residential REIT, Inc. Raises Monthly Common Dividend Guidance to $0.10 per Share for the Third Quarter of 2020,” ARMOUR Residential REIT, Inc., June 22, 2020.)
In other words, ARMOUR Residential has remained a monthly dividend stock. And with ARR stock trading at $10.61 per share, that monthly dividend rate comes out to a generous annual yield of 11.3%.
Looking at ARMOUR Residential’s latest earnings report, we see that, in the third quarter of 2020, the company generated core income of $0.35 per share. Its dividend payments, on the other hand, totaled $0.30 per share for the quarter. Therefore, the company managed to cover its payout. (Source: “ARMOUR Residential REIT, INC. Announces September 30, 2020 Financial Position and Q3 Results,” ARMOUR Residential REIT, Inc, October 21, 2020.)
How to Collect Monthly Dividends from ARMOUR Residential REIT, Inc.
At this point, I wouldn’t say that mortgage REITs are fully out of the woods. But things are looking good for ARR stock, and it’s maintaining its monthly dividend payout for now. Actually, I would be surprised if the company missed a monthly dividend payment declaration.
On December 28, 2020, the REIT announced that it would pay a monthly dividend of $0.10 per share on January 28, 2021—an amount that is consistent with its prior payouts. (Source: “ARMOUR Residential REIT, Inc. Announces Guidance for January 2021 Dividend Rate per Common Share,” ARMOUR Residential REIT, Inc., December 28, 2020.)
The company’s record date for the upcoming dividend is January 15. However, investors should keep in mind that the ex-dividend date is January 14. Investors who buy the stock on or after the ex-dividend date will not receive the dividend; instead, it will be paid to the seller. Therefore, investors who want to be on the distribution list for the January 28 payment will need to own ARR stock before the ex-dividend date. That is, the last day to take action is January 13.