Dynex Capital: This 15.4% Yield Still Has Room To Run

Hunting Alphas 8.94K Followers Follow Summary Rising bond yields are increasing flows into fixed-income instruments, and agency MBS is an outperforming category. Dynex benefits from a constructive agency MBS carry backdrop as portfolio yields remain stable while funding costs have eased. Higher-coupon agency MBS exposure raises prepayment and reinvestment risk, although current rate expectations reduce the likelihood of broad refinancing. Rising rates could pressure Dynex book value, with sensitivity dependent on yield-curve moves, mortgage spreads, and hedge performance. DX trades at a 1.03x P/B, slightly below peer averages, offering reasonable valuation relative to agency RMBS and CMBS mREITs. We Are/DigitalVision via Getty Images Elevator pitch I have covered mortgage REITs (mREITs) like PennyMac Mortgage Investment Trust ( PMT ) and Annaly Capital Management ( NLY ) before. This time, I am expanding my coverage to Dynex Capital Inc. ( DX ) with an initiating bullish view: Rising yields are This article was written by Hunting Alphas 8.94K Followers Follow Hunting Alphas manages a long-only, zero-leverage global equity portfolio through a Self Managed Super Fund. The main portfolio managed is defensive in nature and on a risk-adjusted basis, it has outperformed the market, generating 7.5% annualized alpha, Sortino ratio of 2.0, Information Ratio of 0.67, and low max drawdowns.Hunting Alphas' articles are 5-Minute Stock Pitches that focus on the core stock drivers based on fundamentals, sentiment, valuations, and technical analysis across all types of sectors.Portfolio performance is shared monthly, portfolio holdings disclosed weekly and all the Excel models for the 5-Minute Pitches are shared on the Hunting Alphas website. Note: Hunting Alphas is related to VishValue Research on Seeking Alpha. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in DX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.