ARR data on Yahoo is... not quite correct...
There is more current data available on the company website (including that the company HAS a website which Yahoo doesn't list). The last couple of PR's lay things out pretty well, including the shares that have been sold, those that may be yet, given over-allotments, along with the current OS and the uses they're planning for the money in the recent raises: armourreit.com
The yield and the monthly divvie payments are OK, and mean it probably won't hurt much to hold on to this for a little while, but IMO the primary play at this point isn't as much a play on the future yield as it is a bet on two things:
First, the Fed is (for a reason) advertising long term sustained low interest rates for a long enough period of time to make rising interest rates not much of a concern. One reason they're doing that... is that they wan to use Fed discussion of the long term policy outlook to influence investors choices. The investor choices they most want to influence, are probably those related to investors continued willingness to buy Treasuries, which is funding the Fed's bail out of the global economy following the financial crisis. As a secondary but still important concern, they'd also like to see REAL rates come down... meaning not the rates that matter in the discussions between the Fed, the banks and investors, but the rates that matter in the discussions between the banks and borrowers. Nominally low rates being charged banks... are not "trickling down" into the economy as low rates being charged to businesses and consumers. As banks (hopefully) become more sound in basic practices and in terms of basic solvency, and less "askeert" that they'll screw things up, again, if they lend money... that should begin to change. The "catch-22" is that... mortgage rates still have to come down more to resolve both the banks balance sheet problems, and their willingness to lend against "shrinking" asset values... which will stop shrinking only if real vs. nominal rates come down more. So, having (real) mortgage rates coming down, instead of having government continue paying the banks bail, will solve a lot of problems.
The problem is how to get there.
The banks don't appear to mind borrowing at low rates and using the spread to fatten their bonus pools without bothering themselves about doing much to compete in the lending business... and that situation is paired with the banks expectations, still increasing, that banking should be an enormously lucrative business for bankers, while they profit from transferring risks they shouldn't ever take to others... which is a business model that can't last. How is that realization going to occur ? A different topic, I think...
The second potential for ARR is that QE Next will include a component focused on trying to lower mortgage rates, in general, and specifically, as a result of a focus on Fed purchases of MBS... which makes ARR and the other mortgage REIT's a bet on the value of MBS increasing as a function of demand for them increasing... and the Fed buying MBS will force MBS prices up, and, thus, MBS interest rates down... making borrowing money in mortgages cheaper. The Fed's said recently they don't think they'll actually do that... unless things get worse... but, that still has them erecting a solid backstop behind this trade.
If that shift in the value of MBS I expect does happen... ARR will either make short term trading profits by selling MBS they bought at lower prices, or they'll actually have higher real future yields as a benefit for those who buy ARR now at current share prices, although, then, rising share prices and increasing demand should also tend to lower the actual % yields ? If ARR share prices go up, because the value of their MBS holdings go up, and the yields (computed against then current prices) go down... you can still see YOUR real returns in yields increasing, because you bought at lower prices than others. So, higher prices, lower % yields, and higher real $ yields... is what you should get if that plays out that way. Of course, if, against expectation, (real) interest rates do rise instead of falling some more from here, then you'll tend to get the opposite result.
FWIW, the guys at ARR have been selling quite a few shares... raising money to buy more securities... so, the current and future yields are still an more or less open question... as more shares out will tend to lower the yield... unless... what they're buying with the $ has a return equal to or better than what they already owned ???
If the Fed doesn't buy MBS and force their prices higher ? Well, then, you'll be stuck holding ARR with a trailing 20% yield, that is paid out monthly... but, that ARR is apparently having no difficulty at all selling shares and raising capital right now to buy more MBS ? Well, it looks to me like that is saying that whether the Fed ever buys MBS or not, investors are buying them now, just like those buying ARR shares are stepping up to the plate to buy them anyway... so, the Fed policy is already working whether the Fed ever buys a single MBS or not ?
The moral of that part of the story: don't fight the Fed.
So, if you're buying ARR shares you're both participating in initiating that "virtuous cycle" that needs to happen to help fix the economy... and you're making a reasonable bet that the Fed's jawboning policy will work... or, the alternative to jawboning will work if jawboning doesn't, thus lowering mortgage rates and increasing the investment value of MBS... making ARR a good bet.
If, like me, you're also a believer in the potential that all the money that's been pumped out into the economy will eventually start sloshing around a bit too much, causing a big problem with inflation... a couple of things...
First, it will... but it will do that, "eventually"... and, at that point interest rates will have to begin rising. For now the problem is that the vast quantities of money being pumped into the economy aren't sloshing around at all... not even a little... not enough to make a ripple, or to get things remotely wet enough to be slippery enough that a well lubricated economic floor will allow those things that should be moving, that aren't moving... to move around a bit more easily than they are.
So, that distant rumbling you feel isn't going to build into a tsunami, here, just yet. Deploy warning sensors. Monitor them. Expect they'll work, and quit worrying about it. So, the trade in ARR is also a bet against rapidly rising inflation and a bet against rapidly rising precious metals prices... in the short term. That future inflation tsunami event I expect is far enough off, now, that spending a day at the beach right now is no problem. Seeing it now... before the landscape is altered.. may even be a good idea. That doesn't mean you should go to the beach now without a plan to reach higher ground quickly at some point in the future...
Second, the current yield on most gold and silver holdings isn't all that hot. Given significant rates of inflation will happen eventually, but aren't likely to happen "really soon"... buying ARR and using the monthly divvie payments to dollar cost average while you buy gold and silver, or gold and silver mining shares ? Particularly if gold and silver get cheaper, that should help to assuage your guilty conscious.
Really, though, you shouldn't even bother to feel guilty about it... first, because you really do need inflation to kick in, and not deflation, to have the trade in gold and silver work (eventually)... so, you might as well help it along and make a nice profit from giving it the kick it needs to happen (eventually). And, doing that above... hedging your bets that way... should also provide a reasonable bit of downside protection in case this idea doesn't work? And, if it does work... by the time the inflation does kick in, you'll own a whole lot of gold and silver shares with a lot of them bought at the lows. And, of course, the risks are another reason a monthly divvie payer is a good idea in this environment, as you won't ever need to feel you're getting stuck waiting for too long to get the next divvie, when you're not comfortable holding for that long. When the effort monitoring the sensors for rising inflation does pay off, sell the ARR and buy more gold and silver, or gold and silver shares, with the profits.
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