PennyMac Leads Group in Composite Rating, Dividend
Real estate investment trusts are known for paying hefty dividends.
Among the 87 stocks in the Finance Property-REIT industry group that trade above 15 a share, about one of every four offer a dividend yield of 5% or more.
PennyMac Mortgage Investment Trust ( PMT ) is the group’s No. 1 in Composite Rating with a 96 and tops in dividend yield at 10.2%.
PennyMac states in its 10-K that the company’s goal is to provide returns to investors over the long term, “principally through dividends and secondarily through capital appreciation.”
While this isn’t news — REITs are required by law to pay out most of taxable income as dividends — it’s a fitting reminder. The greedy investor will sometimes expect more capital appreciation than is realistic out of what is essentially a pass-through investment.
PennyMac’s capital appreciation has lagged the market since the initial public offering in August 2009. The stock has risen 13% since the closing price at its IPO while the S&P 500 has jumped 42%.
So far this year, however, the reverse is true. PennyMac is up about 30% vs. the S&P 500′s 11% gain.
PennyMac invests primarily in distressed mortgage assets. The company’s greatest exposure is in California and Florida.
The company is benefiting from a housing market that many market watchers believe has bottomed.
At the recent earnings call in August, CEO Stanford Kurland said he didn’t think the bottom was “quite there yet on a national basis.” He said the company’s forecasting model expects further declines in some areas, but PennyMac remains “cautiously optimistic.”
The company suffered a loss of 8 cents a share in 2009. In 2010, earnings were $1.44 a share as revenue leapt 1,815%. Last year, EPS rose 67% as revenue climbed 192%.
The Street expects EPS to rise 20% this year on a 192% sales leap.
Pennymac’s most recent breakout from a cup with handle offered a possible buy point at 19.89. However, volume was weak as it cleared the potential entry.
The stock recently returned to its 10-week line. Volume on the decline was disturbingly strong, but also strong as it bounced up.