UPDATE: Compass Point Initiates Coverage on Dynex Capital on Uncommon Mortgage REIT Value
In a report published Monday, Compass Point analyst Jason Stewart initiated coverage on Dynex Capital (NYSE: DX) with a Buy rating and $9.50 price target.
In the report, Compass Point noted, “DX is an internally managed mortgage REIT invested in a diversified portfolio of short duration high quality assets. With 59% of equity capital allocated to CMBS, DX's investment portfolio is unique in the mortgage REIT universe. Historically a conservative investor that operates with lower leverage and limited credit risk, the company delivered a steady quarterly total return to shareholders up until 2Q13. In 2Q13, spread widening and severe interest rate volatility reduced BVPS by $1.36 (-13.2% QoQ) to $8.94. We expect the QoQ decline in BVPS attributable to the widening of credit spreads to ultimately be recovered ($1.06 per share) and believe recent market volatility has created an opportunity for investors. With shares trading at 96% of current estimated BVPS, DX represents an uncommon value for a mortgage REIT that should perform consistently across interest rate cycles. If achieved, our $9.50 price target represents a total return of 27%.”
Dynex Capital closed on Friday at $8.43.
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