CLS Holdings plc (LON:CLI) Stock Goes Ex-Dividend In Just 3 Days

CLS Holdings plc (LON:CLI) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 2nd of April will not receive this dividend, which will be paid on the 29th of April.

CLS Holdings's next dividend payment will be UK£0.051 per share. Last year, in total, the company distributed UK£0.074 to shareholders. Last year's total dividend payments show that CLS Holdings has a trailing yield of 3.8% on the current share price of £1.948. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for CLS Holdings

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. CLS Holdings paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 59% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit CLS Holdings paid out over the last 12 months.

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. Readers will understand then, why we're concerned to see CLS Holdings's earnings per share have dropped 5.8% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. CLS Holdings has delivered 8.8% dividend growth per year on average over the past three years.

The Bottom Line

Is CLS Holdings worth buying for its dividend? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. Overall, it's hard to get excited about CLS Holdings from a dividend perspective.

If you're not too concerned about CLS Holdings's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To help with this, we've discovered 4 warning signs for CLS Holdings (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.