Growth & Yield Drivers Remain in Place for PennyMac Mortgage Investment Trust (PMT)

Competition

Since PennyMac operates as a mortgage REIT that invests largely in non-Agency MBS, its closest peers include Newcastle Investment Corp. (NYSE:NCT) and Nationstar Mortgage Holdings Inc (NYSE:NSM). Newcastle Investment actively manages a portfolio of real estate securities, loans, excess mortgage servicing rights, and other real estate related assets. The company’s investment in real estate securities is spread across residential and commercial security types, providing the company sufficient diversification. The company has a market cap of $1.85 billion and offers a dividend yield of 8.19%.

Nationstar Mortgage Holdings has a market cap of over $3.3 billion and a well diversified investment portfolio. The company engages in servicing of residential mortgage loans besides originating and securitizing single family mortgage loans to government sponsored entities. The company’s recent announcement of its acquisition of sizable mortgage servicing rights, which were in the pipeline, is believed to positively impact future earnings.

Conclusion

While gain on sale margins are normalizing, PennyMac’s volumes are expected to continue to grow, allowing for continued correspondent earnings growth. This gives me sufficient confidence that PennyMac will continue to offer a combination of growth through the correspondent channel coupled with a high dividend yield of 8.8% from the distressed investments.

The article Growth & Yield Drivers Remain in Place for PMT originally appeared on Fool.com and is written by Adnan Khan.

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