Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Clarus Corporation (NASDAQ:CLAR) is about to go ex-dividend in just 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Thus, you can purchase Clarus' shares before the 15th of March in order to receive the dividend, which the company will pay on the 28th of March.

The company's upcoming dividend is US$0.025 a share, following on from the last 12 months, when the company distributed a total of US$0.10 per share to shareholders. Last year's total dividend payments show that Clarus has a trailing yield of 1.5% on the current share price of US$6.55. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Clarus

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Clarus reported a loss last year, so it's not great to see that it has continued paying a dividend. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Clarus didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Luckily it paid out just 14% of its free cash flow last year.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. 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. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.