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Pennymac Mortgage Investment Trust is Oversold

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But making Pennymac Mortgage Investment Trust an even more interesting and timely stock to look at, is the fact that in trading on Tuesday, shares of PMT entered into oversold territory, changing hands as low as $14.61 per share. We define oversold territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.

In the case of Pennymac Mortgage Investment Trust, the RSI reading has hit 28.8 — by comparison, the universe of dividend stocks covered by Dividend Channel currently has an average RSI of 51.0. A falling stock price — all else being equal — creates a better opportunity for dividend investors to capture a higher yield. Indeed, PMT's recent annualized dividend of 1.88/share (currently paid in quarterly installments) works out to an annual yield of 12.41% based upon the recent $15.15 share price.

A bullish investor could look at PMT's 28.8 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side. Among the fundamental datapoints dividend investors should investigate to decide if they are bullish on PMT is its dividend history. In general, dividends are not always predictable; but, looking at the history chart below can help in judging whether the most recent dividend is likely to continue.