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

The board of Orca Energy Group Inc. (CVE:ORC.B) has announced that it will pay a dividend of $0.10 per share on the 15th of October. The dividend yield will be 9.6% based on this payment which is still above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Orca Energy Group's stock price has increased by 34% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Orca Energy Group's Distributions May Be Difficult To Sustain

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Even though Orca Energy Group isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS might fall by 39.9% based on recent performance. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.

Check out our latest analysis for Orca Energy Group

Orca Energy Group's Dividend Has Lacked Consistency

Looking back, Orca Energy Group's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2019, the dividend has gone from $0.148 total annually to $0.287. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Orca Energy Group's EPS has fallen by approximately 40% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Orca Energy Group's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Orca Energy Group (1 is potentially serious!) that you should be aware of before investing. 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.