Climb Global Solutions, Inc. (NASDAQ:CLMB) Stock Goes Ex-Dividend In Just Four Days
It looks like Climb Global Solutions, Inc. (NASDAQ:CLMB) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Climb Global Solutions' shares before the 12th of May in order to be eligible for the dividend, which will be paid on the 19th of May.
The company's next dividend payment will be US$0.17 per share, and in the last 12 months, the company paid a total of US$0.68 per share. Based on the last year's worth of payments, Climb Global Solutions stock has a trailing yield of around 1.4% on the current share price of $48.37. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Climb Global Solutions can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Climb Global Solutions
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Climb Global Solutions paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the past year it paid out 145% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Climb Global Solutions does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.
Climb Global Solutions paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Climb Global Solutions to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see how much of its profit Climb Global Solutions paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Climb Global Solutions's earnings have been skyrocketing, up 21% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Climb Global Solutions has lifted its dividend by approximately 0.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Climb Global Solutions is keeping back more of its profits to grow the business.
To Sum It Up
Is Climb Global Solutions worth buying for its dividend? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Climb Global Solutions's dividend merits.
On that note, you'll want to research what risks Climb Global Solutions is facing. To help with this, we've discovered 1 warning sign for Climb Global Solutions that you should be aware of before investing in their shares.
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.
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