Rithm Holds Up as Fed Hikes While Dynex Bleeds: Discounted Valuation and Covered Dividend Favor RITM

What happened

The Federal Reserve's rate hikes have pressured mortgage REITs, but Rithm Capital (RITM) has held up better than Dynex Capital (DX) due to its borrower-side exposure and diversified fee-based earnings. RITM trades at 0.74x book value with a 2.2x covered dividend, while DX trades at book but distributes more than it earns, making RITM's payout more sustainable in a higher-for-longer rate environment. The latest DeepValue master report confirms a BUY rating, noting RITM's discount to book (~0.75–0.76x), single-digit P/E, and resilience from MSRs, credit, and Sculptor fee income. Recent capital markets access—a $500M 8.0% senior note issuance in June 2025 and covenant compliance—underscores financial flexibility despite macro volatility. With fee AUM growth optionality and a demonstrated dividend track record, RITM offers a wider margin of safety than pure-play mortgage REITs like DX, supporting the thesis that shares are mispriced relative to intrinsic value.

Implication

RITM's borrower-side orientation and secure dividend coverage reduce downside risk compared to DX, whose bondholder model suffers from spread widening. The 0.74x price-to-book valuation provides a tangible margin of safety if mortgage spreads remain volatile. Continued access to unsecured debt markets and covenant compliance indicate funding stability despite higher rates. Fee income from Sculptor and RCM Manager can diversify earnings away from rate-sensitive balance sheet activities. Monitor BVPS, fee AUM net flows, and quarterly dividend declarations to validate the rerating thesis.

Thesis delta

The article reinforces the existing BUY thesis by highlighting RITM's relative resilience versus DX in a Fed hiking cycle. There is no shift in stance; the discount-to-book and covered dividend strengthen the margin of safety. Confidence remains high that RITM will outperform pure-play mortgage REITs over the medium term.