PennyMac Financial Services (NYSE:PFSI) Is Paying Out A Dividend Of $0.20

PennyMac Financial Services, Inc.'s (NYSE:PFSI) investors are due to receive a payment of $0.20 per share on 23rd of November. This payment means the dividend yield will be 1.4%, which is below the average for the industry.

Our analysis indicates that PFSI is potentially undervalued!

PennyMac Financial Services' Dividend Forecasted To Be Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive.

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. Despite the company's shorter dividend history however, calculating for its payout ratio of 7.2% shows that PennyMac Financial Services is able to comfortably pay dividends.

Over the next 3 years, EPS is forecast to expand by 2.0%. The future payout ratio could be 9.2% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

PennyMac Financial Services Is Still Building Its Track Record

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 annual payment back then was $0.48, compared to the most recent full-year payment of $0.80. This means that it has been growing its distributions at 19% per annum over that time. PennyMac Financial Services has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

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. PennyMac Financial Services has seen EPS rising for the last five years, at 35% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

PennyMac Financial Services Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think PennyMac Financial Services might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, PennyMac Financial Services has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.