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

Orca Energy Group Inc. (CVE:ORC.B) will pay a dividend of $0.10 on the 12th of July. This makes the dividend yield 10.0%, which will augment investor returns quite nicely.

View our latest analysis for Orca Energy Group

Orca Energy Group Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Orca Energy Group's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to fall by 17.3% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 254%, which is definitely a bit high to be sustainable going forward.

Orca Energy Group's Dividend Has Lacked Consistency

Looking back, Orca Energy Group's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 5 years was $0.148 in 2019, and the most recent fiscal year payment was $0.291. This means that it has been growing its distributions at 14% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Orca Energy Group's EPS has fallen by approximately 17% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Orca Energy Group's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Orca Energy Group's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Orca Energy Group has 3 warning signs (and 1 which is significant) we think you should know about. Is Orca Energy Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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