Orca Energy Group's (CVE:ORC.B) Dividend Will Be $0.10

The board of Orca Energy Group Inc. (CVE:ORC.B) has announced that it will pay a dividend on the 12th of July, with investors receiving $0.10 per share. This makes the dividend yield 9.9%, which will augment investor returns quite nicely.

Check out our latest analysis for Orca Energy Group

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. 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 works out to be a compound annual growth rate (CAGR) of approximately 14% a year 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.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Orca Energy Group's EPS has declined at around 17% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

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. We would probably look elsewhere for an income investment.

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. Case in point: We've spotted 3 warning signs for Orca Energy Group (of which 1 is a bit concerning!) 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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