Dynex Capital, Inc. (DX) Cash Flow Statement

Unlike equity REITs, Dynex's assets are financial instruments rather than physical properties, so depreciation is negligible. The FFO/NI ratio of 0.47 in 2026Q2 and 0.08 in 2025Q4 reflects timing differences from mark-to-market gains, not depreciation. Investors should focus on FFO as the cleaner earnings measure, but the gap between net income and FFO is small, suggesting limited non-cash adjustments.

In 2026Q2, dividends of $113.4M were covered by FFO of $181.4M, a 0.63 payout ratio, but in 2025Q1 and Q2, FFO was negative while dividends continued, forcing reliance on cash reserves or external funding. The 2024Q3 payout ratio of 0.99 shows near-total distribution of FFO, leaving minimal retained buffer. AFFO data is unavailable, so true distributable cash flow remains unclear, but the pattern suggests dividends are not consistently covered by core earnings.

Dynex's OCF is insufficient to cover its dividend, with cumulative OCF of $267M versus dividends of $421M over the last five quarters. This gap suggests reliance on debt issuance, share ATM programs, or portfolio sales to fund distributions. The company's aggressive portfolio growth, reflected in revenue surge, likely requires external capital, but the sustainability of this funding model depends on maintaining access to cheap financing.

The wide swings in OCF relative to net income indicate that changes in working capital, likely from margin calls on interest rate swaps or timing of interest receipts, drive cash flow variability. In 2024Q3, OCF was -$2.3M despite positive net income, pointing to cash outflows from collateral postings. Investors should monitor these swings as they may not reflect core earnings power but rather hedging-related cash flows.