Dynex Capital stock target raised to $16 by BTIG

On Friday, BTIG analysts increased their price target on Dynex Capital (NYSE:DX) shares to $16.00, up from $15.00, while reiterating a Buy rating. The adjustment reflects a positive stance on the company’s earnings potential and stock valuation, both on an absolute basis and compared to its peers. Currently trading at $13.87, the stock offers a substantial 12.98% dividend yield, which InvestingPro data shows has been maintained for 18 consecutive years. The analysts see potential for an increased dividend if mortgage-backed securities (MBS) spreads continue to exceed historical averages and if there is further steepening of the yield curve.

BTIG’s analysts estimate that Dynex Capital’s current net asset value (NAV) stands at $13.50, after accounting for the $0.15 February dividend, which is scheduled to go ex-dividend on February 23. The stock currently trades at a Price-to-Book ratio of 1.09x, near its 52-week high of $13.95, reflecting strong investor confidence supported by a remarkable 28.13% return over the past year. The analysts noted that while investors are used to mortgage REITs trading close to 1x NAV, the sustainability of returns has not been as strong in the past 10-15 years, mainly due to the Federal Reserve’s involvement in the MBS market and the government-sponsored enterprises (GSEs) being in conservatorship.

The firm’s outlook suggests that book value may not limit the potential for well-positioned companies to grow and enhance their stock flow and liquidity through capital raising. According to BTIG, the current market environment provides an opportunity for quality stories within the mortgage REIT sector to build scale and deepen their liquidity. This view is supported by Dynex Capital’s GOOD Financial Health Score on InvestingPro, which offers comprehensive analysis and additional insights through its detailed Pro Research Report, available alongside 1,400+ other top US stocks.

In other recent news, Dynex Capital Inc . reported its fourth-quarter 2024 earnings, significantly exceeding analysts’ expectations with an earnings per share (EPS) of $0.60, compared to the forecasted $0.01. However, the company fell short on revenue, reporting $6.89 million against the anticipated $23.1 million. Despite the revenue miss, the substantial EPS beat highlights strong operational efficiency and cost control measures. The company also expanded its common equity capital by 40% year-over-year, reaching over $1 billion. Analysts from firms like Janney and UBS have been closely monitoring Dynex’s strategic investment decisions and hedge strategy adjustments. The company remains focused on disciplined growth, particularly in Agency RMBS investments, with the potential for 200-300 basis points additional return on equity. Looking forward, Dynex Capital projects EPS growth, with forecasts of $0.83 for FY2025 and $0.68 for FY2026, as it continues to navigate potential market changes and opportunities.

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