Dynex Capital Stock: Get Paid Monthly From This Bullish 12.7%-Yielder
August 20, 2024
DX Stock Great for Income and Growth
Some analysts were calling for the Federal Reserve to announce a massive 50-basis-point emergency interest rate cut. However, the stock market has since erased most of the losses from the meltdown earlier in the month, and bond yields have returned to where they were before the weaker-than-expected jobs report.
As a result, analysts now expect the Fed to announce a 25-basis-point cut in interest rates when it meets next in September, pricing in a move from the range of 5.25% to 5.5% to the range of 5.0% to 5.25%.
Even with interest rates expected to decline significantly over the next year or so, the days of near-zero interest rates may be a thing of the past. At the very least, interest rates are expected to remain above where they were before the 2020 health crisis. And that will continue to be great news for the companies that profit on lending money. That includes Dynex Capital Inc (NYSE:DX), an internally managed mortgage real estate investment trust (mREIT). (Source: “Second Quarter 2024 Earnings Presentation,” Dynex Capital Inc, August 12, 2024.)
The company primarily invests in residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and CMBS interest-only (IO) securities. Dynex’s current portfolio is 97% agency RMBS.
This high concentration of RMBS investments helps provide the mREIT with balanced income generation and capital preservation. This is due in part to the fact that RMBS securities are backed by government-sponsored entities, which provides them with a level of security and stability.
For the second quarter, Dynex Capital reported an economic loss of $0.31 per share, a comprehensive loss of $0.18 per share, and a book value per share of $12.50. During the quarter, the company raised equity capital of $124.7 million and purchased $551.1 million worth of higher-coupon agency RMBS. It ended the quarter with $644.0 million in liquidity. (Source: “Dynex Capital, Inc. Announces Second Quarter 2024 Results,” Dynex Capital Inc, July 22, 2024.)
Commenting on the results, Byron L. Boston, the company’s chairman and co-chief executive officer, said, “Dynex continued to execute on its strategic plan to deliver consistent dividend income with disciplined capital management. We raised capital at attractive levels and are ready to take advantage of the generationally wide spreads in the mortgage market.”
Maintains Monthly Dividend at $0.13
Unlike the vast majority of dividend stocks, Dynex Capital stock distributes its payouts monthly.
Most recently, on July 12, Dynex declared a monthly cash dividend of $0.13 per share, or $1.56 on an annualized basis, for a current yield of 12.7%.
That’s a big yield, and roughly 325% higher than the current inflation rate of 2.97%. That ultra-high dividend yield isn’t a fluke that’s a result of a lower share price. The company’s trailing annual dividend yield is 12.75% and the five-year average dividend yield is 11.6%.
Dynex Capital Stock Has 20% Upside
Dynex Capital stock has been rewarding buy-and-hold investors for years. Since its initial public offering in June 1989, DX stock has returned, with dividends reinvested, total profits of 9,471%.
Its near-term gains have been impressive, too. As of this writing, Dynex Capital stock is up approximately five percent year to date and 7.5% over the last year. Bigger gains are expected, with analysts providing a 12-month share price range of $13.33 to $14.50 per share. This points to potential gains of 9.6% to 20%.
Chart courtesy of StockCharts.com
The Lowdown on Dynex Capital Stock
Listed on NYSE in 1989, Dynex Capital stock is the longest tenured mREIT on Wall Street. Over the years, it has provided investors with solid growth and a reliable dividend. In fact, its disciplined investment process has allowed Dynex to outperform its peers.
Over the last five years, DX stock has returned total profits of 36.2%, compared to a 23% loss from agency REITs and a 16.8% loss from iShares Mortgage Real Estate Capped ETF (BATS:REM).
