Yahoo Finance PennyMac Financial Services (NYSE:PFSI) Has Announced A Dividend Of $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 May. Based on this payment, the dividend yield will be 0.9%, which is fairly typical for the industry.
See our latest analysis for PennyMac Financial Services
PennyMac Financial Services' Payment Has Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, PennyMac Financial Services was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 6.9%, which we would be comfortable to see continuing.
PennyMac Financial Services Doesn't Have A Long Payment History
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. 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 14% over that duration. 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.
Dividend Growth May Be Hard To Achieve
The company's investors will be pleased to have been receiving dividend income for some time. However, PennyMac Financial Services has only grown its earnings per share at 3.9% per annum over the past five years. While growth may be thin on the ground, PennyMac Financial Services could always pay out a higher proportion of earnings to increase shareholder returns.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about PennyMac Financial Services' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, PennyMac Financial Services has 4 warning signs (and 1 which is a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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