Keefe, Bruyette & Woods raised its target price for Dynex Capital (NYSE:DX) to $15.25 from $14.50 on Thursday and continued to carry an Outperform rating on the stock.
The firm pointed to a 3-4% year-to-date gain in Dynex's book value as the primary rationale for the higher target, a change that the research house said corresponds to an adjusted book value in the range of approximately $13.85 to $14.00 per share. In its note, Keefe, Bruyette & Woods also referenced the stock's current price-to-book ratio of 1.66 as an indicator of investor confidence in the company's asset base.
On the earnings front, KBW held its fiscal year 2026 forward estimate steady at $1.21 per share while making a modest upward revision to its fiscal year 2027 forecast, raising it to $1.33. The firm models economic returns of about 15% for 2026 and 2027, a level it describes as broadly comparable to the break-even return on equity implied by Dynex Capital's $0.17 monthly dividend. KBW further noted that it expects the dividend to remain reasonably well covered at current return assumptions.
In a separate valuation datapoint contained in the note, the firm observed that Dynex Capital shares are trading at roughly 1.06 times book value and produce a yield of 13.8%. Keefe, Bruyette & Woods expressed the view that valuation is likely to trend higher as the company's market capitalization grows.
Recent corporate results and capital-marketing activity provide additional context for the analyst's views. Dynex Capital reported fourth-quarter 2025 earnings per share of $1.16, which materially exceeded the consensus forecast of $0.38 - a surprise on the order of 205.26% relative to expectations cited in the research note. The company's comprehensive income for the quarter was reported at $190 million, contributing to a full-year comprehensive income tally of $354 million.
Dynex also amended its stock distribution agreement, increasing the number of common shares available for sale by 60 million to a total of 221,292,973 shares. Of that total, 67,354,187 shares remain available for issuance under the amended agreement. The amendment was executed with a group of sales agents that includes BTIG, LLC and J.P. Morgan Securities LLC, among others, according to the materials referenced by KBW.
Taken together, the analyst update and recent company developments underline several financial and strategic moves by Dynex Capital in the most recent reporting period. The research firm's maintenance of 2026 earnings guidance alongside a slight 2027 upgrade, coupled with the higher price target, reflects its view that modest book-value appreciation and outsized quarterly earnings support a higher valuation multiple over time.
Key points
- KBW raised Dynex Capital's price target to $15.25 and maintained an Outperform rating - an update driven by a 3-4% year-to-date rise in book value.
- KBW left FY2026 EPS at $1.21 and increased FY2027 EPS to $1.33 while modeling roughly 15% economic returns for 2026/2027, near the dividend-implied break-even ROE.
- Dynex reported a substantial Q4 2025 EPS beat ($1.16 vs. $0.38 expected) and amended its stock distribution agreement to add 60 million shares to the available pool.
Risks and uncertainties
- Valuation metrics cited in the update include differing price-to-book figures (1.66 and 1.06), which could reflect varying reference points and may complicate direct comparisons for investors - affecting market and financial-sector assessments.
- Coverage of the $0.17 monthly dividend is tied to modeled economic returns; if actual returns deviate materially from the firm's ~15% assumptions, dividend coverage and investor yield expectations could be impacted - relevant to income-focused investors and the broader fixed-income substitute segment.
- The amendment to the stock distribution agreement increases share availability for sale, which could influence market capitalization dynamics depending on how and when shares are issued - a consideration for equity market liquidity and capital-markets activity.
Note: This article reflects the analyst update and company disclosures described in the firm note and reported financial results. It does not introduce any additional forecasts or data beyond those presented by Keefe, Bruyette & Woods and Dynex Capital.