Clarus Corporation (NASDAQ:CLAR) has announced that it will pay a dividend of $0.025 per share on the 26th of March. This means the annual payment will be 2.3% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Clarus

Clarus Might Find It Hard To Continue The Dividend

Even a low dividend yield can be attractive if it is sustained for years on end. Despite not generating a profit, Clarus is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Analysts expect the EPS to grow by 96.5% over the next 12 months. The company seems to be going down the right path, but it will take a little bit longer than a year to cross over into profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Clarus' Dividend Has Lacked Consistency

It's comforting to see that Clarus has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 7 years was $0.0996 in 2018, and the most recent fiscal year payment was $0.10. Dividend payments have grown at less than 1% a year over this 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.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Clarus' earnings per share has shrunk at 52% a year over 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.

Clarus' Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Clarus that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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