UPDATE: Bank of America Downgrades ARMOUR Residential REIT to Neutral, Lowers PT

In a report published Friday, Bank of America downgraded its rating on ARMOUR Residential REIT

from Buy to Neutral, and slightly lowered its price target from $7.25 to $7.00. Bank of America noted, “We are downgrading ARMOUR Residential (ARR) to Neutral from Buy, as we think elevated prepayments could weigh further on earnings and dividends. ARR will likely continue to generate an attractive dividend yield at 12%, supporting a Neutral rating, though we see little upside in the shares. Specifically, prepayments rose to 19.1% CPR at the end of '12 from 11.6% in October '12, likely driven by seasoning, and we expect elevated prepayments to remain with '13 EPS closer to $0.95 versus the $1.05 consensus. That said, ARR's valuation seems reasonable at 0.90x of Q3'12 stated BV with an expected yield of 12%, suggesting it remains a decent yield stock for the foreseeable future.” ARMOUR Residential REIT closed on Thursday at $7.18.