PennyMac Financial Services (NYSE:PFSI) Will Pay A Dividend Of $0.20

The board of PennyMac Financial Services, Inc. (NYSE:PFSI) has announced that it will pay a dividend on the 26th of August, with investors receiving $0.20 per share. This payment means the dividend yield will be 1.4%, which is below the average for the industry.

Check out our latest analysis for PennyMac Financial Services

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

Even a low dividend yield can be attractive if it is sustained for years on end.

Having paid out dividends for only 3 years, PennyMac Financial Services does not have much of a history being a dividend paying company. Despite the company's shorter dividend history however, calculating for its payout ratio of 6.3% shows that PennyMac Financial Services is able to comfortably pay 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 Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. 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. 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 36% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

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. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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