Compass Point starts ‘nimble’ Dynex Capital with a Buy

As previously reported, Compass Point initiated coverage of Dynex Capital with a Buy rating and $14.50 price target. Dynex, as a smaller mREIT with a portfolio sized at about $7B, is more nimble and has been able to roll the bulk of its investment portfolio out of TBAs that became less advantageously priced into higher coupon specified pools during 2023, the analyst tells investors. While Dynex routinely taps its at-the-market instrument to issue common equity, which “has and could continue to negatively impact valuation,” the firm thinks the company’s strategy could allow book value per share, or BVPS, to recover to $14.73, the level at the end of 2022 before adverse market volatility took BVPS down to $13.31 at year-end 2023.