Orca Energy Group (CVE:ORC.B) Is Due To Pay A Dividend Of $0.10

The board of Orca Energy Group Inc. (CVE:ORC.B) has announced that it will pay a dividend on the 13th of January, with investors receiving $0.10 per share. This means the annual payment is 8.2% of the current stock price, which is above the average for the industry.

Our analysis indicates that ORC.B is potentially undervalued!

Orca Energy Group's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Orca Energy Group was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 71.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

Orca Energy Group Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2018, the annual payment back then was $0.148, compared to the most recent full-year payment of $0.297. This means that it has been growing its distributions at 19% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Orca Energy Group has impressed us by growing EPS at 71% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Orca Energy Group Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Orca Energy Group might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Orca Energy Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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