PennyMac Financial Services (NYSE:PFSI) Has Announced A Dividend Of $0.20

The board of PennyMac Financial Services, Inc. (NYSE:PFSI) has announced that it will pay a dividend on the 24th of February, with investors receiving $0.20 per share. Including this payment, the dividend yield on the stock will be 1.2%, which is a modest boost for shareholders' returns.

See our latest analysis for PennyMac Financial Services

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

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. Since 2020, the dividend has gone from $0.48 total annually to $0.80. This means that it has been growing its distributions at 19% per annum over that time. 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 could be attracted to the stock based on the quality of its payment history. 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. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

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. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for PennyMac Financial Services you should be aware of, and 1 of them is significant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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