Group 1 - Dynex Capital, Inc. (NYSE: DX) is a mortgage REIT currently yielding near 17% [1] - The analysis focuses on Dynex's strategy, the context of its yield, and investment ideas [1] - The firm conducting the analysis, Pearl Gray, specializes in systematic analysis of Bonds, Preferreds, and REITs, primarily in the Financials and Real Estate sectors [1] Group 2 - The mission of Pearl Gray is to discover actionable total return ideas that combine academic theories, practical experience, and common sense [1]

Dynex Capital (DX) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #1 (Strong Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.Since a changing earning ...

Group 1 - The article promotes a portfolio strategy that generates income without the need for selling assets, aiming to simplify retirement investing [1] - It emphasizes the importance of community and education in investing, suggesting that individuals should not invest alone [2] - The service offers features such as model portfolios, buy/sell alerts, and regular market updates to support investors [2] Group 2 - The article mentions that the service has a focus on conservative investment options, including preferred and baby bond portfolios [2] - It highlights the active engagement of the community, providing a platform for discussions and access to service leaders [2] - The service philosophy is centered around generating strong returns and reducing stress associated with retirement investing [1][2]

Financial Performance - Total economic return for Q1 2025 was $0.33 per common share, representing 2.6% of beginning book value[110] - The net (loss) income to common shareholders for the three months ended March 31, 2025, was $(4,999), a decrease from $49,163 in the previous quarter[129] - The company reported a total net gain of $11.299 million for the three months ended March 31, 2025, after accounting for realized and unrealized gains and losses[145] - The company’s comprehensive income to common shareholders was $14,391,000 for the three months ended March 31, 2025, compared to $12,562,000 in the previous quarter[129] - Economic net interest income for the three months ended March 31, 2025, was $27.984 million, compared to $18.813 million for the three months ended December 31, 2024[155] Investment Portfolio - The investment portfolio increased approximately 13% from December 31, 2024, with 74% in Agency RMBS, 24% in TBA securities, and 2% in Agency CMBS and CMBS IO[117] - Agency RMBS purchases during Q1 2025 amounted to approximately $895.1 million, with $325.4 million pending settlement as of March 31, 2025[117] - The fair value of the investment portfolio increased by $171.6 million during the three months ended March 31, 2025, primarily due to a decline of 36 basis points in the 10-year U.S. Treasury rate[141] - The unrealized gain on investments for the three months ended March 31, 2025, was $109,997, compared to a loss of $223,225 in the previous quarter[129] - The company experienced a realized gain of $17.3 million and an unrealized gain of $134.8 million in its investment portfolio for the three months ended March 31, 2025[145] Income and Expenses - Net interest income increased by $17.1 million due to newer investments in MBS with more attractive yields, while financing costs continued to decline[111] - The total interest income for the three months ended March 31, 2025, was $95,059, an increase from $88,496 in the previous quarter[131] - Operating expenses for the three months ended March 31, 2025, increased by $2.9 million compared to the previous quarter, driven by higher bonus accruals and stock-based compensation[148] - Total operating expenses for Q1 2025 were $12.1 million, compared to $9.2 million in Q4 2024[155] - The company reported net losses on its hedging portfolio of $(171.1) million during the same period, largely due to declines in U.S. Treasury rates and SOFR rates[142] Capital and Liquidity - Capital raised through the ATM program totaled $239.7 million in Q1 2025, with an additional $38.7 million raised by April 24, 2025[115] - As of March 31, 2025, the company's liquidity was $789.9 million, consisting of $327.4 million in unrestricted cash, $450.3 million in unencumbered Agency MBS, and $12.2 million in noncash collateral pledged by counterparties, an increase from $658.3 million as of December 31, 2024[161] - The company issued 17,604,999 shares of common stock through its ATM program, resulting in proceeds of $239.7 million, which were partially deployed into Agency RMBS and margin requirements for a larger hedge portfolio[160] - The company's leverage was 7.4 times shareholders' equity as of March 31, 2025, with repurchase agreement leverage at 5.2 times shareholders' equity[163][164] - The balance outstanding for repurchase agreements as of March 31, 2025, was $7,234.7 million, an increase from $6,563.1 million as of December 31, 2024[166] Market Conditions and Risks - The company expects continued volatility in the market and is focused on maintaining a portfolio of high-quality liquid securities[113] - The company is actively monitoring prepayment risk and the evolving structure of GSEs in response to policy changes[114] - The company anticipates potential impacts from geopolitical events, including the wars between Russia and Ukraine and Israel and Hamas, on macroeconomic conditions[186] - Future competition for investments and financing is a concern, along with the availability and cost of financing[186] - The company is subject to risks related to changes in interest rates and credit spreads, which may affect its investment portfolio performance[189] Tax and Dividend Policy - The company is required to distribute at least 90% of its REIT taxable income to shareholders for each taxable year[173] - Dividend distributions are generally funded through portfolio cash flows, with excess distributions funded from existing cash balances or return of principal from investments[176] - The projected amortization of the company's net deferred tax hedge gains to be recognized as taxable income totals $719.0 million, with $100.1 million expected in fiscal year 2025[175] - The company had $566.3 million in capital loss carryforwards as of March 31, 2025, the majority of which will expire by December 31, 2028[175] Miscellaneous - The company utilizes various channels for material information dissemination, including SEC filings and public conference calls[190] - Forward-looking statements include expectations regarding future operating results, capital management, and dividend policy[185]

Group 1 - The article focuses on Dynex Capital (DX) from the perspective of preferred stockholders, particularly its Series C preferred shares [1] - It highlights five significant developments regarding Dynex Capital since the last update [1] Group 2 - The article encourages exploration of various investment tools and portfolios designed for yield and risk management [1]

1 Safe Harbor Statement NOTE: This presentation contains certain statements that are not historical facts and that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this presentation addressing expectations, assumptions, beliefs, projections, estimates, future plans, strategies, and events, developments that we expect or anticipate will occur in the future, and future operating results or financial condition are forward-looking ...

Group 1: Earnings Performance - Dynex Capital reported quarterly earnings of $0.20 per share, exceeding the Zacks Consensus Estimate of $0.14 per share, compared to a loss of $0.30 per share a year ago, representing an earnings surprise of 42.86% [1] - The company posted revenues of $17.13 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 29.01%, compared to year-ago revenues of -$3.19 million [2] Group 2: Stock Performance and Outlook - Dynex Capital shares have declined approximately 7.8% since the beginning of the year, while the S&P 500 has decreased by 10.2% [3] - The current consensus EPS estimate for the upcoming quarter is $0.21 on revenues of $17.63 million, and for the current fiscal year, it is $0.83 on revenues of $75.07 million [7] Group 3: Industry Context - The REIT and Equity Trust industry, to which Dynex Capital belongs, is currently ranked in the bottom 21% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

Financial Data and Key Metrics Changes - The company raised $270 million of new capital year-to-date, achieving this at a premium to book value, which is accretive to shareholders [33] - Net interest income continues to trend up as new investments with attractive yields are added to the portfolio while financing costs trend down [32] - The leverage ratio increased from 7.4% to 7.8% due to a decline in book value [72] Business Line Data and Key Metrics Changes - The portfolio generated a total return of 2.6% during a quarter with significant swings in rates, validating the investment strategy [36] - Agency RMBS spreads widened sharply, ranging from 145 to 160 basis points over treasuries by the end of the quarter [42] - The company maintained a disciplined liquidity-focused risk management process, allowing it to navigate market volatility without crystallizing losses [43] Market Data and Key Metrics Changes - Long-end treasury yields unexpectedly rose, reflecting selling pressure, while the dollar experienced weakness against major currencies [15] - The market saw a classic risk-off reaction following the April 2nd tariff announcement, leading to declines in equity prices and sharp drops in interest rates [40] - The availability of repo funding remained strong, with costs stable between 15 and 17 basis points over SOFR [63] Company Strategy and Development Direction - The company continues to see compelling opportunities in agency residential mortgage-backed securities while managing through a rapidly changing landscape [55] - A focus on disciplined risk management and real-time adjustments is emphasized as the regulatory and political landscape evolves [27] - The company is preparing for potential changes in the GSEs and is evaluating outlier scenarios for market reactions [24] Management's Comments on Operating Environment and Future Outlook - Management views the current environment as favorable, with a steeper yield curve and lower financing costs supporting the business model [8] - The company is prepared for continued volatility in the financial and economic environments, expecting surprises in the future [28] - The dividend is set based on long-term returns, capital availability, and overall risk, with a recent increase reflecting confidence in generating attractive returns [30] Other Important Information - The company has operated with generally lower leverage and a robust liquidity position, allowing it to remain agile amid external shifts [21] - Management emphasizes the importance of transparency in investments, with all assets marked and reflected in earnings and book value [57] - The executive team collectively owns nearly 2% of the company, aligning their interests with those of shareholders [58] Q&A Session Summary Question: Repo funding costs and availability - Repo funding costs have been stable between 15 and 17 basis points over SOFR, with strong availability in financing markets [63] Question: Hedging strategy amidst volatility - The company is comfortable with its current hedge composition, primarily using swaps as a natural hedge for the mortgage portfolio [65] Question: Investing opportunities in the current environment - The steeper curve and wider spreads present significant ROE potential, with diversification across the coupon stack providing duration certainty [70] Question: Book value and dividend implications - The book value includes the dividend accrued, and leverage is at 7.8 times, reflecting a cautious approach to adding risk [76][78] Question: Preparing for GSE changes and potential spread widening - The company is focused on maintaining liquidity to withstand price shocks and is conducting scenario analysis for potential GSE changes [122][91]

Financial Performance - Total economic return of $0.33 per common share, representing 2.6% of beginning book value, with dividends declared of $0.47 per common share and a decline in book value of $(0.14) per common share[5] - Comprehensive income of $0.16 per common share, while net loss was $(0.06) per common share for the first quarter of 2025[8] - Book value per common share decreased to $12.56 as of March 31, 2025, down from $12.70 as of December 31, 2024[7] Capital and Liquidity - Raised equity capital of $240 million through at-the-market common stock issuances, net of issuance costs[5] - Liquidity position stood at $790 million as of March 31, 2025[5] Assets and Liabilities - Total assets increased to $9.04 billion as of March 31, 2025, compared to $8.18 billion as of December 31, 2024[7] - Total liabilities increased to $7.65 billion as of March 31, 2025, up from $6.99 billion as of December 31, 2024[7] Interest Income and Expenses - Net interest income rose to $17.13 million for the first quarter of 2025, compared to $6.89 million in the previous quarter[8] - For Q1 2025, total interest income increased to $95,059,000 from $88,496,000 in Q4 2024, representing an increase of 1.77%[12] - The net interest income for Q1 2025 was $17,133,000, up from $6,887,000 in Q4 2024, indicating a significant increase of 148.5%[23] - Economic net interest income rose to $27,984,000 in Q1 2025, compared to $18,813,000 in Q4 2024, reflecting a growth of 48.5%[23] - The economic net interest spread improved to 0.79% in Q1 2025 from 0.41% in Q4 2024[23] Investment Activities - The company purchased $895 million in Agency RMBS and $55 million in Agency CMBS during the quarter[5] - The average balance of Agency RMBS increased to $7,726,081,000 in Q1 2025 from $7,181,923,000 in Q4 2024, a rise of 7.6%[12] - The effective yield on Agency RMBS improved to 4.66% in Q1 2025 from 4.59% in Q4 2024[12] Derivatives and Risk Management - The company experienced a net loss on derivatives of $118,088,000 in Q1 2025, compared to a gain of $276,670,000 in Q4 2024[15] - The company reported a net periodic interest from interest rate swaps of $10,851,000 in Q1 2025, slightly down from $11,926,000 in Q4 2024[23] - The projected amortization of net deferred tax hedge gains is estimated at $100,144,000 for fiscal year 2025, including $24.9 million for Q1 2025[17] Shareholder Information - The weighted average common shares increased to 90,492,327 in Q1 2025 from 81,145,733 in Q4 2024[23] Company Strategy and Environment - Dynex Capital, Inc. focuses on ethical stewardship of stakeholders' capital and employs comprehensive risk management strategies[28] - The company operates as a REIT and is internally managed to maximize stakeholder alignment[28] - The performance of the investment portfolio is influenced by cash flow, prepayment rates, and credit performance[26] - Changes in Federal Reserve policies regarding Agency RMBS, Agency CMBS, and U.S. Treasuries significantly impact market conditions and asset prices[26] - The company faces risks related to the cost and availability of financing, including potential changes in regulations affecting financial institutions[26] - Increased competition and changes in government regulations are key factors affecting the company's business environment[26] - The company is exposed to risks from defaults by borrowers on loans underlying MBS[26] - There is uncertainty regarding continued government support of the U.S. financial system and housing markets[26] - The company emphasizes the importance of the quality of performance from third-party service providers for critical operations[26] - Forward-looking statements are subject to various risks and uncertainties, and the company undertakes no obligation to update them[27]

Core Insights - Albert Anthony is a Croatian-American media personality who has gained over 1,000 followers on investor platforms since 2023, focusing on markets and stocks [1] - He is set to launch a new book titled "Financial Markets: Growing A Dividend Income Portfolio" in 2025, coinciding with an ongoing series of articles on the same topic [1] - Albert Anthony has a background in management and information systems, having worked in a top-10 financial firm's IT department [1] Company Overview - Albert Anthony & Co. is a sole proprietorship registered in Austin, Texas, and is wholly owned by Albert Anthony [1] - The company does not provide personalized financial advisory services but offers general market commentary based on publicly available data [1] Investment Focus - Albert Anthony has launched the Future Investor Fund, which aims to build a dividend portfolio [1] - The brand emphasizes a home-based investment approach, utilizing the founder's own capital [1]