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PennyMac Financial Services, Inc. (NYSE:PFSI) will pay a dividend of $0.20 on the 26th of August. The dividend yield is 1.4% based on this payment, which is a little bit low compared to the other companies in the industry.
Check out our latest analysis for PennyMac Financial Services
PennyMac Financial Services' Payment Expected To Have Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive.
Having paid out dividends for only 3 years, PennyMac Financial Services does not have much of a history being a dividend paying company. While it has a shorter history of paying out dividends, PennyMac Financial Services' payout ratio of 6.3% is a great sign for current shareholders, as this means that earnings greatly cover dividends.
Looking forward, earnings per share is forecast to fall by 29.9% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 11% over the same time period, which we think the company can easily maintain.
PennyMac Financial Services Doesn't Have A Long Payment History
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2019, the dividend has gone from $0.48 total annually to $0.80. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that PennyMac Financial Services has been growing its earnings per share at 36% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like PennyMac Financial Services' Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.