After reporting less than expected funds from operations, Dynex Capital Inc DX dropped to a new 52-week low and then found enough buyers to bounce back a bit. The real estate investment trust ended up 1.73% on Tuesday, 10/25. The company’s 3rd quarter shows a gain of $.24 per share when analysts had been expecting $.32 per share,
In the previous quarter the trust had FFO of $.54 cents per share.
It’s been difficult for REITs such as Dynex lately with the Fed moving to hike interest rates and with the 30-year fixed mortgage rate recently topping 7%. These factors affect all real estate investments in a number of ways including the cost of financing, the cost of refinancing and the underlying drop in value of buildings, housing and land.
The REIT is now trading at 61% of book value with a price-earnings ratio of just 2.56 while the S&P 500 trades with a p/e of 20.
Dynex had been sliding in price since the beginning of September, perhaps on the expectation of the earnings miss.
Dynex has a long way to go before the price action can begin to look bullish: it’s deeply below the down trending 50-day and 200-day moving averages. The relative strength indicator is diverging positively to price now.
The REIT has declined from the June, 2021 peak of $17.50 to its current $11.44. That’s a 35% drop. Dynex remains well below a down trending 50-week moving average and below a 200-week moving average that looks as if it’s about to turn downward as well. Those big red volume bars of selling during late September and early October indicate how much investors really wanted out. Whether that might suggest something of a washout and perhaps a bottom remains to be seen.
At this price, Dynex would be paying a hefty 14.22% dividend but it’s hard to see how the REIT could sustain that level of a payout under these circumstances.
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