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1. Company Snapshot

1.a. Company Description

Dynex Capital, Inc., a mortgage real estate investment trust, invests in mortgage-backed securities (MBS) on a leveraged basis in the United States.It invests in agency and non-agency MBS consisting of residential MBS, commercial MBS (CMBS), and CMBS interest-only securities.Agency MBS have a guaranty of principal payment by an agency of the U.S. government or a U.S. government-sponsored entity, such as Fannie Mae and Freddie Mac.


Non-Agency MBS have no such guaranty of payment.The company has qualified as a real estate investment trust for federal income tax purposes.It generally would not be subject to federal income taxes if it distributes at least 90% of its taxable income to its stockholders.


The company was incorporated in 1987 and is headquartered in Glen Allen, Virginia.

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1.b. Last Insights on DX

Dynex Capital's recent performance was driven by its strong Q4 2024 results, beating revenue and EPS estimates despite a slight decline in book value per share. Elevated interest rates and wide mortgage spreads are expected to persist, potentially benefiting Dynex's income and reducing refinancing risks. The company's focus on high coupon, government-insured agency products provides an asymmetrical risk-return tradeoff. Additionally, Dynex is poised to benefit from anticipated interest rate cuts in 2025, with the stock selling at a 4% discount to book value and offering substantial value for passive income investors with a stable 13% dividend yield."

1.c. Company Highlights

2. Dynex Capital's Resilient Performance Amidst Market Volatility

Dynex Capital, Inc. reported a strong financial performance in the third quarter, with a total economic return of 10.3% for the quarter and year-to-date shareholder returns of 20%. The company's net interest income continues to trend upward as it adds new investments with attractive yields to its portfolio. The actual EPS came out at $0.25, which was lower than the estimated $0.44. The company's revenue growth is estimated to be 96.7% next year, indicating a strong growth trajectory.

Publication Date: Nov -21

📋 Highlights
  • Strong Shareholder Returns: Dynex reported 20% year-to-date shareholder returns and a 10.3% total economic return for Q3.
  • Capital Raise: The company raised $254 million in Q3 and $776 million year-to-date, enabling investments at a premium to book value.
  • Investment Strategy: A deliberate bias toward lower coupons and increased exposure to Agency CMBS, with spreads expected to tighten over time.
  • Leverage & ROE: Current leverage is mid-to-high teens, with a focus on balancing risk and returns to sustain durable profitability.
  • Book Value & Hedging: Estimated book value of $12.71 (net of dividend accrual) and use of options to manage portfolio duration amid low volatility.

Investment Strategy and Portfolio Composition

Dynex's differentiated platform invests in residential and commercial mortgage-backed securities, with a deliberate bias towards lower coupons, which are poised to outperform, especially when mortgage rates decline. The company has increased its exposure to Agency CMBS modestly in the last quarter and expects to increase its exposure to Agency CMBS relative to RMBS as RMBS spreads tighten. As T.J. Connelly, Chief Investment Officer, noted, agency mortgage spreads remain wide relative to their own history and most credit products, and the longer-term outlook favors tighter agency mortgage spreads.

Valuation and Dividend Yield

With a Price-to-Book Ratio of 0.93, Dynex's stock is trading close to its book value. The Dividend Yield is 14.63%, which is attractive for income-seeking investors. The company's ability to raise capital at a premium to book value is a positive sign, with $254 million raised in the third quarter and $776 million year-to-date. The current leverage is around mid-teen to high-teen numbers, and the book value is estimated to be $12.71 net of the dividend accrual as of Friday's close.

Risk Management and Hedging Strategy

Dynex is focused on durable shareholder-first decisions, with a competitive dividend and disciplined approach to risk management. The company uses options to stabilize the duration of their portfolio and considers macroeconomic factors and the distribution of outcomes when evaluating hedging strategies. As Smriti Popenoe noted, they are prepared for potential tail events and are constantly preparing for unexpected events to manage their portfolio.

Outlook and Opportunities

The company's size and scale allow them to remain nimble and take advantage of opportunities across the coupon stack. With a strong demand outlook for housing markets, driven by bank deposit growth and institutional investors, Dynex is well-positioned to capitalize on opportunities in the mortgage-backed securities market. The mortgage REIT community also remains a marginal source of demand, creating opportunities for volatility in spreads.

3. NewsRoom

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Dynex Capital: Positioned For Wide Spreads And Low Prepays

Dec -04

Source: seekingalpha.com

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6 Dividend Stocks Ready To Benefit From 2026's Rate-Shift Economy

Dec -04

Source: forbes.com

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105,155 Shares in Dynex Capital, Inc. $DX Bought by Advisors Asset Management Inc.

Dec -01

Source: defenseworld.net

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This Real Estate Stock Is Yielding 14.6%!

Dec -01

Source: fool.com

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Want $3,500 per Year in Monthly Passive Income? Invest Just $2,500 in These Generous Dividend Stocks

Nov -24

Source: 247wallst.com

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Forget Market Speculation: My Dual-Pick Strategy For +15% Yield

Nov -20

Source: seekingalpha.com

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Dividend Power Dogs: 12 Ideal Safer November Stars

Nov -16

Source: seekingalpha.com

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Dynex Capital, Inc. Declares Monthly Common Stock Dividend of $0.17 Per Common Share for November 2025

Nov -10

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.03%)

6. Segments

Real Estate Investment Trust

Expected Growth: 7.03%

Dynex Capital, Inc.'s 7.03% growth in Real Estate Investment Trust (REIT) is driven by increasing demand for mortgage-backed securities, expansion of its investment portfolio, and strategic asset allocation. Additionally, the company's focus on agency-backed securities and its ability to navigate interest rate fluctuations have contributed to its growth.

7. Detailed Products

Mortgage Servicing

Dynex Capital, Inc. offers mortgage servicing solutions to clients, providing loan administration, payment processing, and customer service.

Whole Loan Trading

Dynex Capital, Inc. engages in whole loan trading, purchasing and selling mortgage loans on the secondary market.

Mortgage-Backed Securities (MBS)

Dynex Capital, Inc. invests in and manages mortgage-backed securities, providing investors with access to the mortgage market.

Commercial Mortgage-Backed Securities (CMBS)

Dynex Capital, Inc. invests in and manages commercial mortgage-backed securities, providing investors with access to the commercial mortgage market.

Asset Management

Dynex Capital, Inc. provides asset management services, managing mortgage-backed securities and other mortgage-related assets on behalf of clients.

8. Dynex Capital, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Dynex Capital, Inc. is medium due to the presence of alternative investment options for customers.

Bargaining Power Of Customers

The bargaining power of customers is low for Dynex Capital, Inc. as customers have limited negotiating power.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium for Dynex Capital, Inc. as suppliers have some negotiating power.

Threat Of New Entrants

The threat of new entrants is high for Dynex Capital, Inc. due to the relatively low barriers to entry in the industry.

Intensity Of Rivalry

The intensity of rivalry is high for Dynex Capital, Inc. due to the presence of several competitors in the industry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 86.07%
Debt Cost 6.43%
Equity Weight 13.93%
Equity Cost 10.55%
WACC 7.01%
Leverage 618.00%

11. Quality Control: Dynex Capital, Inc. passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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MFA Financial

A-Score: 6.5/10

Value: 7.8

Growth: 2.3

Quality: 7.9

Yield: 10.0

Momentum: 2.5

Volatility: 8.3

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KKR Real Estate Finance Trust

A-Score: 6.3/10

Value: 8.1

Growth: 3.9

Quality: 6.2

Yield: 10.0

Momentum: 2.0

Volatility: 7.7

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Dynex Capital

A-Score: 6.0/10

Value: 2.7

Growth: 3.1

Quality: 5.8

Yield: 10.0

Momentum: 5.0

Volatility: 9.7

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NexPoint Real Estate Finance

A-Score: 6.0/10

Value: 6.0

Growth: 2.2

Quality: 6.5

Yield: 10.0

Momentum: 4.0

Volatility: 7.0

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Invesco Mortgage Capital

A-Score: 5.9/10

Value: 5.6

Growth: 3.2

Quality: 5.1

Yield: 10.0

Momentum: 3.5

Volatility: 8.0

1-Year Total Return ->

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Granite Point Mortgage Trust

A-Score: 5.9/10

Value: 8.8

Growth: 1.9

Quality: 5.8

Yield: 10.0

Momentum: 5.0

Volatility: 4.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

14.03$

Current Price

14.03$

Potential

-0.00%

Expected Cash-Flows