Dynex Capital expands at-the-market offering

GLEN ALLEN, VA - Dynex Capital, Inc. (NYSE:DX), a real estate investment trust (REIT), announced today an expansion of its at-the-market equity offering program. The company entered into a fifth amendment to its distribution agreement, which increases the number of shares available for sale by 33,235,621 to a total of 69,353,243 shares. Of these, 35,468,000 shares remain available for issuance.

The amendment, effective as of today, adds Janney Montgomery Scott LLC, Keefe, Bruyette & Woods, Inc., RBC Capital Markets, LLC, UBS Securities LLC, and Wells Fargo Securities, LLC as additional sales agents for the offering. The shares will be offered pursuant to the company's existing shelf registration statement and a related prospectus supplement filed with the Securities and Exchange Commission (SEC).

Dynex Capital's at-the-market offering allows the company to sell common stock directly on the New York Stock Exchange at prevailing market prices. This method of offering provides the company with flexibility to raise capital over time and to respond to market conditions and strategic opportunities.

The sales agents and their affiliates have historically provided various banking and brokerage services to Dynex Capital and are expected to continue in this capacity. Fees and commissions paid by Dynex Capital for these services will be in line with customary rates.

In other recent news, Dynex Capital has reported a robust financial performance in the third quarter of 2024, including a 7% economic return and a 6.5% return year-to-date. This has led the company to increase its common dividend by 15%, from $0.13 to $0.15 per share. The company executives pointed to a favorable investment environment characterized by declining funding costs and a steeper yield curve as key contributors to this positive performance.

Dynex Capital also raised $56 million in new capital and reported a book value of $13 per share. The management team, including Byron Boston and Smriti Popenoe, expressed optimism for the company's performance in 2025, with a strategic focus on navigating near-term event risks. They are prepared for potential rate movements and prepayment risks and anticipate a terminal Fed funds rate between 3% and 4%, and mortgage rates ranging from 5% to 7%.

Despite the rise in expenses mainly due to performance-based compensation and potential realized hedge losses, the company remains confident in its investment strategy. The management team believes that its strategic approach to leveraging capital and effective hedging, despite rising rates, will continue to deliver value to shareholders. This confidence is reflected in their raised dividend and solid third-quarter performance.

InvestingPro Insights

Dynex Capital's expansion of its at-the-market equity offering program aligns with its attractive dividend profile and current market valuation. According to InvestingPro data, the company boasts a significant dividend yield of 14.5%, which is particularly noteworthy given that it has maintained dividend payments for 17 consecutive years, as highlighted by an InvestingPro Tip. This consistent dividend history may appeal to income-focused investors and could support demand for the newly available shares.

The company's financial metrics provide context for this capital raising initiative. With a market capitalization of $980.08 million and a price-to-book ratio of 0.95, Dynex Capital appears to be trading slightly below its book value. This valuation, combined with a P/E ratio of 12.34 over the last twelve months, suggests that the company may be attractively priced relative to its earnings and assets.

However, investors should note that analysts anticipate a sales decline in the current year, according to another InvestingPro Tip. This forecast, along with the company's expansion of its equity offering, may indicate that Dynex Capital is proactively managing its capital structure in anticipation of market challenges.

For readers interested in a deeper analysis, InvestingPro offers 7 additional tips for Dynex Capital, providing a more comprehensive view of the company's financial health and prospects.

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