Dynex Captial Inc. (NYSE: DX) has a strong history of producing a double-digit return on your investment by sharing a $0.27 dividend. Their dividend for the last 5 quarters has been $0.29 when they bumped the dividend up from $0.28 per share. At the current stock price of $8.77 October 1, 2013) the annualized return on investment is 13%. This earns a recommended buy and hold for its long term income potential or reinvest to grow your money with a compounding rate of buying more shares in the company. The company also has Preferred shares A (DXPRA) and B (DXPRB) both have cumulative dividends.
In a press release Dynex Capital announced on September 25, 2013, that the record date for its recently declared quarterly dividends of $0.53125 per Series A Preferred stock and $0.4765625 per Series B Preferred stock has been changed to October 7, 2013 from the previously announced date of October 1, 2013. The change assures the dividend record date is consistent with New York Stock Exchange notice requirements. The Series A Preferred and Series B Preferred dividend payment date remains October 15, 2013 as originally announced. The record date and payment date for the Company's recently announced common stock dividend remain October 7, 2013 and October 31, 2013, respectively, as previously announced.
Several impressive statistics from the briefing includes the book value has continued to rise as the company turns out a profit each year. The company's investment strategy has been focused on shorter term rates and lowering leverage. Both of these are in preparation of QE3 curtailment, and/or the end of QE3. With interest rates expected to increase, Dynex is better positioned to be flexible in the market and take advantage of new opportunities.
Dynex Capital is an internally managed mortgage real estate investment trust which invests in mortgage assets on a leveraged basis. The company's portfolio mix includes Hybrid MREITs, Common REITs, Agency REITs and Non-Agency REITs.
Investments in the Agency and non-Agency are mortgage-backed securities (MBS). Agency MBS consist of residential MBS (NASDAQ:RMBS) and commercial MBS (NYSEARCA:CMBS), which come with a guaranty of principal payment by an agency of the U.S. government or a U.S. government-sponsored entity such as The Federal National Mortgage Association (OTCQB:FNMA) and The Federal Home Loan Mortgage Corporation (OTCQB:FMCC). Non-Agency MBS (also consisting of RMBS and CMBS) have no such guaranty of payment. A portion of company's Agency and non-Agency CMBS also includes interest only securities. Although most companies have all of these also, the company is managing the risk with the returns to balance the growth and profit with their assessment or risks. This is a good reflection of wise leadership.
The company demonstrates strength in its robust revenue growth, notable return on equity and attractive valuation levels. Dynex's revenue growth has outpaced the industry average of 10.8%. Since the same quarter one year prior, revenues rose by 20.6%. Growth in the company's revenue appears to have helped boost the earnings per share. The return on equity has improved when compared to the same quarter one year prior. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, Dynex Capital Inc.'s return on equity exceeds that of both the industry average and the S&P 500.
The gross profit margin for Dynex is currently very high, coming in at 89.46%. DX's net profit margin of 87.53% significantly outperformed against the industry. Dynex reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. During the past fiscal year, Dynex increased its bottom line by earning to $1.36 versus $1.05 in the prior year.
Dynex has underperformed the S&P 500 Index, declining 18.25% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings enhances the return on investment and worthy of additional review.
With another solid dividend and return on your investment near 13%, Dynex is a strong investment into the future. If you are interested in preferred shares A and B both have cumulative dividends. Paying in the 8% range with a guarantee of cumulative dividends is a good hedge against drops in the market. We provide a buy rating on DX and buy for those wanting a little more security on both preferred shares A and B.
Disclosure: I am long DX. 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.