Dynex Capital(US:DX)2026-01-26 16:02Financial Data and Key Metrics Changes - The total economic return for the fourth quarter was 10.2%, consisting of $0.51 of common dividends and a $0.78 increase in book value per share [25] - For the year, the book value increased by $0.75, and $2 of dividends per common share were declared, paid monthly [25] - Comprehensive income for the quarter was $190 million and $354 million for the year [25] - The company ended the quarter with leverage of 7.3x total equity and a strong liquidity position of $1.4 billion in cash and unencumbered securities, representing over 55% of total equity [25] Business Line Data and Key Metrics Changes - The TBA and mortgage-backed securities portfolio started the year at $9.8 billion, grew to $15.8 billion at the end of September, and ended the year at $19.4 billion [27] - The current book value is estimated to be in the range of $13.85-$14.05 per share, up 3%-4% from year-end [28] - The company raised $1.5 billion over the last 13 months at the most accretive levels in its history [25] Market Data and Key Metrics Changes - The company experienced a 29.4% total shareholder return in 2025, driven by both dividend income and significant share price performance [8] - The total equity market capitalization, including preferred shares, was $3 billion as of the end of last week [8] - The company raised and invested over $1 billion in 2025, with a price-to-book valuation rising [16] Company Strategy and Development Direction - The company aims to create a resilient business at the intersection of capital markets and real estate finance, focusing on disciplined execution and long-term value creation [7][30] - The management emphasizes the importance of adapting to changing environments and maintaining a performance-first mentality [4][6] - The company is evolving its business steadily, fine-tuning people, processes, technology, and structure to align with its strategy [13] Management's Comments on Operating Environment and Future Outlook - Management highlighted the impact of government policy on asset returns, indicating that it is one of the most powerful forces shaping the market [14] - The company is prepared for a wider range of outcomes and has tilted its risk appetite towards liquidity and flexibility [10] - The management expressed confidence in the mortgage market's stability and the potential for attractive returns due to rising global demand for income [11][20] Other Important Information - The company has added depth and breadth to its team, including a new Chief Operating Officer and expanded corporate development capabilities [9] - The management noted that the current environment is characterized by policy complexity, shifting rate expectations, and geopolitical crosscurrents [8] Q&A Session Summary Question: Can you quantify where you see incremental investment returns today? - Management indicated that hedged ROEs are in the mid-teens with leverage around 7x, and with targeted leverage in the low 8s, ROEs could reach mid- to high teens [33] Question: How does this compare to three months ago given the spread tightening? - The dynamic is roughly between 150 and 300 basis points tighter than at the end of the last quarter [35] Question: Can you discuss the probability of politically motivated actions to improve housing affordability? - Management acknowledged the historical role of GSEs in managing housing and indicated that government intervention is possible [48][49] Question: What are the current opportunities for capital deployment? - Management noted that the belly of the coupon stack, primarily fives, has been the most interesting, with opportunities across the coupon stack [55] Question: How do you see the GSEs' longer-term role in the market? - Management believes that the $200 billion cap could be extended and that GSEs will continue to play a significant role in the market [73]