ARR vs NLY: Which Is the Better Buy in 2026?
Last updated August 2026
Short answer
NLY is the larger of the two ($17.12B market cap): the incumbent the market prices for continued execution (7.31x forward earnings, beta 1.24). ARR is the smaller challenger ($2.33B), cheaper on forward earnings (5.61x): more room to run, but more to prove. The real question is which set of drivers you believe, and whether owning one (or both) leaves you over-concentrated.
ARR vs NLY: the tie-breaker metrics
Same yardstick, side by side (as of August 2026). Valuation lined up like this is most meaningful for two names in the same corner of the market, which these are. Figures are approximate; verify before investing.
| Metric | ARR | NLY | What it tells you |
|---|---|---|---|
| Market cap | $2.33B | $17.12B | Size. The larger name is the incumbent; the smaller has more room to grow and more to prove. |
| Forward P/E | 5.61 | 7.31 | Valuation on next year's expected earnings, the same yardstick for both. Lower is cheaper for that growth; higher means the market is paying up. |
| Trailing P/E | 3.73 | 5.49 | Valuation on the last 12 months. A big drop from trailing to forward means the market expects earnings to jump, so more growth is already in the price. |
| Beta | 1.34 | 1.24 | Volatility vs the market. Above 1 swings harder than the index; below 1 is steadier. Higher beta means bigger drawdowns to hold through. |
| Price vs 52-week range | 47% of range | 60% of range | Where today's price sits between the 52-week low and high. Near the high is momentum with less margin of safety; near the low is out of favor or a discount, depending on why. |
| Price / book | 0.87 | 1.15 | How much you pay over book value. Very high can signal an asset-light, high-return business or a rich price. |
Reading it: ARR is the cheaper of the two on forward earnings, but cheaper is not the same as better. Pair the valuation with growth (how far the forward P/E sits below the trailing P/E) and risk (beta) before you decide.
Before you buy: how ARR and NLY affect your concentration
The metrics above tell you which is the marginally better business. The bigger risk for most people is not picking the slightly worse stock, it is over-concentrating. ARR and NLY share themes, so owning both, or adding either to what you already hold, can quietly push a large share of your portfolio into one bet.
This is the part a generic comparison page cannot answer, because it depends on what you own. Connect your brokerage and Walnut shows your real, combined ARR and NLY exposure, flags overlap with your existing positions, and tells you if adding one would tip you past a concentration you are comfortable with, read-only by default, with your login staying at your broker. Walnut is not an investment adviser.
What does ARMOUR Residential REIT (ARR) do?
ARMOUR Residential REIT (ARR) is an agency mortgage REIT based in Vero Beach, Florida, and externally managed by ARMOUR Capital Management. Its business is a leveraged carry trade: it uses shareholder equity plus heavy short-term borrowing (mostly repurchase agreements) to hold a portfolio of mortgage-backed securities issued or guaranteed by U.S. government-sponsored entities such as Fannie Mae and Freddie Mac. As of Q1 2026 the investment portfolio totaled about $21.1 billion, roughly 92.5% in Agency MBS, funded mainly by around $18.5 billion of repurchase agreements and hedged with about $12.9 billion notional of interest-rate swaps. The debt-to-equity ratio was 7.90 to 1 (implied leverage about 8.21 to 1), and net interest income was $70.7 million for the quarter. ARMOUR earns the spread between the yield on its MBS and its cost of borrowing and hedging, then distributes most of it as a monthly dividend.
What does Annaly Capital Management (NLY) do?
Annaly Capital Management is one of the largest and oldest mortgage real estate investment trusts (mREITs) in the United States. It runs a roughly $107 billion investment portfolio, the bulk of which (about $92 billion as of Q1 2026) sits in highly liquid agency mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, complemented by growing residential credit and mortgage servicing rights (MSR) sleeves. The business model is essentially a leveraged carry trade: Annaly funds long-dated mortgage assets with short-term repo borrowings, earns the spread between the two, hedges interest-rate exposure with swaps and other instruments, and distributes the profit as dividends under REIT rules.
ARR vs NLY: how do they differ?
Both fit overlapping themes, but they are not interchangeable. The useful comparison is which set of drivers and risks you want exposure to.
- ARR drivers: High monthly income is the core draw; Book value is the number that really matters.
- NLY drivers: Wide net interest spread and covered dividend; Diversification into residential credit and MSR.
Which fits which kind of investor
A faster-growing, richer-valued name usually swings harder, so it suits a longer horizon and a higher tolerance for volatility; a steadier, more cash-generative business suits a more conservative or income-minded investor. The honest test is which set of risks you could hold through a drawdown: ARMOUR carries the classic risks of a leveraged agency mortgage REIT, amplified by some of the highest leverage among its peers (around 8 to 1). For NLY, the dominant risk is interest-rate and spread volatility: a sharp move in rates or a widening of mortgage spreads can cut book value per share quickly, as seen historically when the stock and dividend both fell.
ARR or NLY: which should you pick?
Growth-minded investors who believe the theme has years to run tend to accept the richer multiple for more upside; value-minded investors lean toward the cheaper forward earnings and steadier profile. Pick ARR if you believe its drivers more; NLY if you believe its. Many investors hold both, but since they share themes, that is a concentrated bet, not diversification. Decide deliberately and check overlap. For the full detail, see the ARR and NLY guides.
ARR vs NLY: the full fundamentals
ARR. For an agency mortgage REIT, ignore the price-to-earnings ratio and focus on book value per share, the dividend, and leverage. The stock typically trades close to (sometimes at a discount or premium to) book value, so book value is the anchor for valuation. GAAP earnings can be wildly positive or negative because of non-cash hedge marks, which is why ARMOUR reports distributable earnings as a cash-flow proxy for dividend coverage. Total economic return (the change in book value plus dividends paid) is the cleanest way to judge a quarter. The very high yield reflects high leverage and rate risk, not a free lunch: a large yield often comes with the chance of book-value and dividend erosion.
NLY. As of July 2026 NLY trades around $22-23 per share, a modest premium to its ~$19.82 Q1 2026 book value. Earnings available for distribution of ~$0.76 covered the dividend, and the net interest spread of ~1.42% (net interest margin ~1.71%) is the key metric to watch quarter to quarter. Trailing-twelve-month revenue was roughly $2.4 billion, but for a levered mortgage REIT book value per share and dividend coverage matter far more than a revenue multiple.
Headline figures (approximate, FY2025 results and Q1 2026 results (reported April 2026)): ARR shows book value per common share $17.42 (Mar 31, 2026), down 6.5% from $18.63 at year-end 2025, net interest income (q1 2026) $70.7 million, distributable earnings (q1 2026) $90.5 million, or $0.76 per share, gaap net result (q1 2026) Net loss of $58.0 million, or $(0.49) per share (driven by hedge marks); NLY shows market cap ~$16 billion, book value per share (q1 2026) ~$19.82, dividend yield ~13%, quarterly dividend (q2 2026) ~$0.75/share.
The bottom line: ARR vs NLY
ARR and NLY are related but distinct: same themes, different businesses and risks. Neither wins in the abstract; the right pick is whichever thesis you actually believe, sized so you are not over-concentrated in one theme. Walnut can show your combined ARR and NLY exposure against your real portfolio. It is not an investment adviser.
Wondering how ARR or NLY fits the portfolio you already own? Walnut is an AI investing app that connects your brokerage read-only and answers questions like that about your actual holdings: overlap, concentration, and how each position tracks the S&P 500. Compare the best AI portfolio analyzers or see the best AI investing apps in 2026.
Investing in ARMOUR Residential REIT with AI
Connect the broker you already use and ask Walnut's AI how ARR fits what you actually hold: whether you own it already through a fund, what it would do to your concentration, and how it has tracked the S&P 500. Read-only by default, and you approve anything before it reaches your broker.
FAQ
What is the difference between ARR and NLY?
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ARMOUR Residential REIT (ARR) is an agency mortgage REIT based in Vero Beach, Florida, and externally managed by ARMOUR Capital Management. Annaly Capital Management is one of the largest and oldest mortgage real estate investment trusts (mREITs) in the United States. They show up together because they share investment themes, but they are different businesses, so the better fit depends on which thesis you are expressing.
Is ARR or NLY the better stock?
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Neither is universally better. NLY is the larger incumbent; ARR is the smaller challenger and looks cheaper on forward earnings. Walnut is informational, not investment advice. Compare what each does, the tie-breaker metrics above, and the risks, then decide which fits your thesis and what you already own.
Which is cheaper, ARR or NLY?
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On forward P/E (as of August 2026), ARR trades at 5.61x and NLY at 7.31x, so ARR is the cheaper of the two on next year's expected earnings. A lower multiple is not automatically the better buy: a richer valuation can be justified by faster growth, and a lower one can reflect real risk. Weigh the multiple against how fast each business is compounding.
Should you own both ARR and NLY?
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Because they share themes, owning both concentrates you in that theme. That can be intentional (a focused bet) or accidental (less diversification than it looks). Walnut can show your combined exposure across both, and whether adding either over-concentrates you, before you buy.
What are the risks of ARR vs NLY?
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ARR: ARMOUR carries the classic risks of a leveraged agency mortgage REIT, amplified by some of the highest leverage among its peers (around 8 to 1). Rising or volatile interest rates can compress the net interest spread and erode book value quickly, as the 6.5% book-value drop in Q1 2026 showed. The high leverage magnifies both gains and losses and creates funding risk if repo markets tighten or margin calls spike. Prepayment risk matters too: when rates fall, homeowners refinance and the MBS pay off early, forcing reinvestment at lower yields. The dividend is not guaranteed and has been cut in past cycles; with distributable earnings barely covering the payout, a downturn in the spread could pressure it. The stock has also tended to trade and pay distributions that, over long stretches, return capital rather than build it, so total return can lag the headline yield. NLY: The dominant risk is interest-rate and spread volatility: a sharp move in rates or a widening of mortgage spreads can cut book value per share quickly, as seen historically when the stock and dividend both fell. Annaly runs meaningful leverage funded with short-term repo, so a funding-market disruption or margin calls could force asset sales at bad prices. The dividend is not guaranteed and has been cut multiple times over the company's history when spreads compressed. Prepayment risk erodes the value of premium MBS when rates fall, while rising rates pressure book value; the position is difficult to win on both sides. Finally, the stock can trade at a premium or discount to book value, so investors face price risk on top of portfolio risk.
Walnut is informational, not investment advice. This page is descriptive and not a recommendation to buy or sell ARR or NLY; figures are approximate and dated (as of August 2026). Verify current data before investing.