With stellar second quarter 2012 results, a year-to-date return of 57.8% and an impressive dividend yield of 9.0%, shares of PennyMac Mortgage Investment Trust (PMT) are currently hovering near its all-time high of $24.70. Earnings for this Zacks #2 Rank (Buy) mortgage REIT (real estate investment trust) are expected to grow 26.0% in 2012, thereby making it a solid pick for investors seeking both growth and income.
Strong Second Quarter
On August 2, PennyMac Mortgage reported strong second quarter results with a more than a two-fold increase in net investment income to $64.4 million. Net income surged 78.3% year over year to $29.6 million. On a per share basis, earnings stood at 79 cents, surpassing the Zacks Consensus Estimate by 19.7% and topping last year's 59 cents.
PennyMac Mortgage achieved a 17% average return on equity during the quarter. The company raised $200 million worth of new equity capital that was deployed in accretive investments. Cash flow from investments stood at $116 million, up 46% from the prior quarter.
PMT is scheduled to report again on October 26. The Zacks Consensus Estimate is at 81 cents, a full ten cents better than three months ago.
Surge in Earnings Estimate Revisions
Over the past 90 days, the Zacks Consensus Estimate for 2012 increased by 28 cents or 10.1% to $3.04, suggesting year-over-year growth of 26.0%. The Zacks Consensus Estimate for 2013 has increased 22 cents or 7.5% to $3.16 over the same period, representing growth of 3.9%.
PennyMac Mortgage paid a dividend of 55 cents per share in the second quarter of 2012. The quarterly dividend represents a 10.0% increase from the payout in the year-ago quarter. The current dividend payment affirms a significant yield of 9.0%.
PennyMac Mortgage’s valuation looks reasonable on a price-to-earnings (P/E) and price-to-book (P/B) basis. Shares of PennyMac Mortgage are trading at a forward P/E of 8.02x, versus the peer group average of 14.15x. On a P/B basis, the stock is currently trading at 1.24x, which is identical to the peer group average. Its PEG ratio is 0.71 based on a 5-year earnings growth rate of 11.3%.
Since January 9, 2012, PennyMac Mortgage shares have consistently fared better than the simple moving average for 200 days or SMA (200). The year-to-date return for the stock is noteworthy at 57.8% compared to the S&P 500 tally of 14.0%.
With recent indications of stabilization in home prices coupled with low mortgage rates, rising earnings estimates, robust growth projections and a healthy dividend yield, PennyMac Mortgage offers an enticing upside potential going forward. In addition, positive data, such as homebuilder sentiment reaching a four-year high and a recent uptick in pending home sales, bode well for its long-term growth.
Based in Moorpark, California, PennyMac Mortgage invests primarily in residential mortgage loans and mortgage-related assets. The company seeks to provide risk-adjusted returns to its investors over the long-term through steady dividends and capital appreciation. Founded in 2009, the company is externally managed by PNMAC Capital Management, LLC, which specializes in residential mortgage loans. PennyMac Mortgage has also entered into a loan servicing agreement with PennyMac Loan Services, LLC. The company currently has a market cap of $1.4 billion.