Dynex Capital Falls To New Low, Then Bounces, After FFO Falls Below Expectations

After reporting lower than expected funds from operations, Dynex Capital Inc (NYSE: DX ) dropped to a new 52-week low and then found enough buyers to pull back a bit. The real estate investment trust ended up 1.73% on Tuesday, 10/25. The company’s 3rd quarter shows a profit of $.24 per share when analysts were expecting $.32 per share,

Last quarter the trust had FFO of $.54 cents per share.

It’s been tough for REITs like Dynex lately as the Fed has moved to raise interest rates and the 30-year fixed mortgage rate recently topped 7%. These factors affect all real estate investments in many ways including the cost of financing, the cost of refinancing and the underlying depreciation of buildings, housing and land.

The REIT now trades at 61% of book value with a price-earnings ratio of just 2.56 while the S&P 500 trades at an ap/e of 20.

Dynex’s price has fallen since the beginning of September, perhaps in anticipation of the loss of profits.

Dynex still has a long way to go before price action starts to look bullish: it is below the down trending 50-day and 200-day moving averages. The relative strength indicator is positively diverging from today’s price.

The REIT is down from a June, 2021 peak of $17.50 to its current $11.44. That’s a 35% decrease. Dynex remains below a down trending 50-week moving average and below a 200-week moving average that looks like it’s about to drop. The big red sell volume bars in late September and early October indicate how much investors want. Whether that might suggest something of a washout and perhaps a bottom remains to be seen.

At this price, Dynex would pay a hefty 14.22% dividend but it’s hard to see how the REIT can sustain that level of a payout under these circumstances.

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