Get Paid Monthly by Dynex Capital Inc
In the income stock spotlight today: DX stock.
All the talk of tariffs and a potential recession means the Federal Reserve will probably keep its interest-rate cuts on hold. At least for now. The central bank is still expected to cut rates twice this year. But time will tell.
While the broader markets have been dipping in and out of correction territory and consumer sentiment has been taking a hit, not all stocks are in the red. Dynex Capital Inc (NYSE:DX), an internally managed mortgage real estate investment trust (mREIT) is trading at its highest levels in 27 years.
There have been concerns that interest-rate cuts would harm mREITs, but those fears may be a little overblown. The Fed isn’t slashing interest rates as quickly as many expected. Moreover, the U.S. housing market remains strong and the average 30-year fixed mortgage rates remain near seven percent. That’s all good news for mREITs like Dynex Capital.
Virginia-based Dynex Capital is an mREIT that invests primarily in residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and CMBS interest-only (IO) securities. The company’s current portfolio is 98% agency RMBS. (Source: “Q4 2024 Earnings Presentation,” Dynex Capital Inc, March 18, 2025.)
This high concentration of RMBS investments helps provide Dynex with balanced income generation and capital preservation. This is due in part to the fact that RMBS securities are backed by government-sponsored entities, providing them with a level of security and stability.
For the fourth quarter ended December31, 2024, Dynex Capital reported total economic return of $0.13 per share and $0.99 per share for the full year. Fourth-quarter net income was $0.61 per share, up from $0.38 per share in the fourth quarter of 2023. Full-year net income was $1.50 per share, a big improvement over the 2023 net loss of $0.25 per share. (Source: “Dynex Capital, Inc. Announces Fourth Quarter and Full Year 2024 Results,” Dynex Capital Inc, January 27, 2025.)
During the quarter, the mREIT raised equity capital of $64.4 million; its total capital raised for 2024 was $332.0 million. Its average balance of interest-earnings assets increased 36% during the year.
Commenting on the results, Smriti Popenoe, Dynex’s co-chief executive officer and president, said, “Our shareholders have earned a total shareholder return of 13.7% in 2024 and 27.4% over the last two years on their investment in Dynex, during a period of significant volatility and an inverted yield curve.”
“We strategically added capital in order to stay prepared to capitalize on favorable conditions, such as the current environment characterized by a steeper yield curve, significantly lower financing costs, wide mortgage spreads to Treasuries, and beneficial swap hedges that support strong returns,” she added.
Monthly Dividend Upped to $0.17/Share
As an mREIT, Dynex has to legally distribute at least 90% of its taxable earnings to shareholders as dividends. Better still, unlike the vast majority of dividend stocks, DX stock distributes its payouts monthly. And that payout has been on the rise of late.
In November, Dynex Capital increased its monthly distribution from $0.13 per share to $0.15 per share. For March, the mREIT’s board increased the monthly distribution again to $0.17 per share, or $2.04 per share, for a massive dividend yield of 14.23%. That’s 500% higher than the current inflation rate of 2.82%.
That ultra-high dividend yield isn’t a result of a lower share price. DX stock’s trailing annual dividend yield is 11.02% and its five-year average dividend yield is 11.41%.
DX Stock Crushing the Market
On one hand, DX stock is crushing the broader markets, up:
- 6.5% over the last month
- 21% over the last three months
- 20% over the last six months
- 33% year over year
On the other hand, shareholders have become accustomed to this kind of performance. Dynex’s owner-operated structure and high-performance culture have resulted in reliable returns that have consistently outperformed S&P 500 Financials and iShares Mortgage Real Estate Capped ETF (NYSE:REM) since 2008.
Since its June 1989 initial public offering (IPO), DX stock has provided total returns (dividends reinvested) of 12,286%.
Chart courtesy of StockCharts.com
The Lowdown on DX Stock
With DX stock having been listed on the NYSE in 1989, Dynex is the longest tenured mREIT on Wall Street. Over the years, it has provided investors with solid growth and a reliable dividend.
Dynex Capital continued to deliver solid results last year while executing on its strategy to build a resilient and sustainable business.
On the dividend and stock fronts, the mREIT’s disciplined investment process has allowed it to outperform its peers. Over the last five years, DX stock has returned total profits of 164%, compared to 88% from iShares Mortgage Real Estate Capped ETF (NYSE:REM) and 134% from the S&P 500, and also slightly better than the 157% from S&P 500 Financials.
A stock that outperforms the markets is what shareholders and institutional investors are looking for. And, currently, 233 institutions hold 46.42% of all outstanding shares. The three biggest holders of DX stock are BlackRock, Inc., The Vanguard Group, and Geode Capital Management, LLC.