Head to Head Review: ARMOUR Residential REIT (ARR) vs. Starwood Waypoint Homes (SFR)

ARMOUR Residential REIT (NYSE: ARR) and Starwood Waypoint Homes (NYSE:SFR) are both financials companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, dividends, analyst recommendations, valuation, risk and profitability.

Insider & Institutional Ownership

58.2% of ARMOUR Residential REIT shares are held by institutional investors. 1.5% of ARMOUR Residential REIT shares are held by company insiders. Comparatively, 5.0% of Starwood Waypoint Homes shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Dividends

ARMOUR Residential REIT pays an annual dividend of $2.28 per share and has a dividend yield of 9.0%. Starwood Waypoint Homes pays an annual dividend of $0.88 per share and has a dividend yield of 2.4%. ARMOUR Residential REIT pays out 45.1% of its earnings in the form of a dividend. Starwood Waypoint Homes pays out -314.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. ARMOUR Residential REIT has increased its dividend for 2 consecutive years. ARMOUR Residential REIT is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares ARMOUR Residential REIT and Starwood Waypoint Homes’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
ARMOUR Residential REIT $263.99 million 4.02 -$45.51 million $5.06 5.01
Starwood Waypoint Homes $575.68 million 8.28 -$81.26 million ($0.28) -132.61

ARMOUR Residential REIT has higher earnings, but lower revenue than Starwood Waypoint Homes. Starwood Waypoint Homes is trading at a lower price-to-earnings ratio than ARMOUR Residential REIT, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

ARMOUR Residential REIT has a beta of 0.75, indicating that its stock price is 25% less volatile than the S&P 500. Comparatively, Starwood Waypoint Homes has a beta of 0.77, indicating that its stock price is 23% less volatile than the S&P 500.

Profitability

This table compares ARMOUR Residential REIT and Starwood Waypoint Homes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ARMOUR Residential REIT 76.46% 9.39% 1.37%
Starwood Waypoint Homes -7.41% -1.07% -0.47%

Analyst Recommendations

This is a breakdown of current recommendations for ARMOUR Residential REIT and Starwood Waypoint Homes, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ARMOUR Residential REIT 0 0 0 0 N/A
Starwood Waypoint Homes 0 4 6 0 2.60

Starwood Waypoint Homes has a consensus price target of $37.50, suggesting a potential upside of 1.00%. Given Starwood Waypoint Homes’ higher probable upside, analysts plainly believe Starwood Waypoint Homes is more favorable than ARMOUR Residential REIT.

About ARMOUR Residential REIT

ARMOUR Residential REIT, Inc. is a real estate investment trust. The Company invests in and manages a leveraged portfolio of mortgage-backed securities (MBS) and mortgage loans. The Company invests in residential mortgage backed securities issued or guaranteed by a United States Government-sponsored enterprise (GSE), such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, or a government agency, such as the Government National Mortgage Association (collectively, Agency Securities). The Company also invests in Interest-Only Securities, which are the interest portions of Agency Securities that are separated and sold individually from the principal portion of the same payment. The Company raises funds for additional funding through equity offerings (including preferred equity), unsecured debt securities and convertible securities (including warrants, preferred equity and debt), among others. It is managed by ARMOUR Capital Management LP.

About Starwood Waypoint Homes

Starwood Waypoint Homes, formerly Colony Starwood Homes, is an internally managed real estate investment trust (REIT). The Company was formed primarily to acquire, renovate, lease and manage residential assets in select markets across the United States. It is focused on acquiring single-family rental (SFR) homes through a variety of channels, renovating these homes to the extent necessary and leasing them to qualified residents. The Company operates through two segments, which are represented by its portfolio of SFR homes and its portfolio of NPLs owned in the joint venture with Prime Asset Fund VI, LLC (Prime). The Company identifies and pursues individual home acquisition opportunities through various sources, including multiple listing services (MLS) listings, foreclosure auctions and short sales. As of December 31, 2016, its SFR portfolio consisted of 31,684 owned homes, including 31,065 rental homes and 619 homes that it does not intend to hold for the long term.

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