Clarus Corporation (NASDAQ:CLAR) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Clarus' shares before the 18th of November in order to receive the dividend, which the company will pay on the 27th of November.

The company's next dividend payment will be US$0.025 per share, and in the last 12 months, the company paid a total of US$0.10 per share. Based on the last year's worth of payments, Clarus has a trailing yield of 2.3% on the current stock price of US$4.40. If you buy this business for its dividend, you should have an idea of whether Clarus's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Clarus

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Clarus paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Clarus was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Clarus's dividend payments are effectively flat on where they were six years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

Remember, you can always get a snapshot of Clarus's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Clarus? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Second, the dividend was not well covered by cash flow." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Clarus.

So if you're still interested in Clarus despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Be aware that Clarus is showing 2 warning signs in our investment analysis, and 1 of those shouldn't be ignored...

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.