PennyMac Financial Services' (NYSE:PFSI) Dividend Will Be $0.20

PennyMac Financial Services, Inc. (NYSE:PFSI) has announced that it will pay a dividend of $0.20 per share on the 24th of February. The dividend yield is 1.2% 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

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

PennyMac Financial Services is just starting to establish itself as being able to pay dividends to shareholders, given its short 3-year history of distributing earnings. Based on its last earnings report however, the payout ratio is at a comfortable 8.9%, meaning that PennyMac Financial Services may be able to sustain this dividend for future years if it continues on this earnings trend.

The next 3 years are set to see EPS grow by 2.7%. Analysts forecast the future payout ratio could be 8.5% over the same time horizon, which is a number we think the company can maintain.

PennyMac Financial Services Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.48 in 2020 to the most recent total annual payment of $0.80. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that PennyMac Financial Services has been growing its earnings per share at 17% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for PennyMac Financial Services' prospects of growing its dividend payments in the future.

We Really Like PennyMac Financial Services' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for PennyMac Financial Services (1 is significant!) that you should be aware of before investing. Is PennyMac Financial Services not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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