Clarus (NASDAQ:CLAR) Has Affirmed Its Dividend Of $0.025
Clarus Corporation (NASDAQ:CLAR) has announced that it will pay a dividend of $0.025 per share on the 24th of November. The dividend yield is 2.0% based on this payment, which is a little bit low compared to the other companies in the industry.
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. Clarus' stock price has reduced by 41% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
See our latest analysis for Clarus
Clarus' Payment Has Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even though Clarus 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.
According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 0.5%, so there isn't too much pressure on the dividend.
Clarus' Dividend Has Lacked Consistency
Looking back, Clarus' dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the dividend has gone from $0.0996 total annually to $0.10. Dividend payments have been growing, but very slowly over the period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Clarus' EPS has fallen by approximately 50% 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 don't think Clarus is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Clarus that investors need to be conscious of moving forward. Is Clarus 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.
