Four Days Left Until Clear Secure, Inc. (NYSE:YOU) Trades Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Clear Secure, Inc. (NYSE:YOU) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Therefore, if you purchase Clear Secure's shares on or after the 23rd of February, you won't be eligible to receive the dividend, when it is paid on the 5th of March.

The company's upcoming dividend is US$0.09 a share, following on from the last 12 months, when the company distributed a total of US$0.36 per share to shareholders. Based on the last year's worth of payments, Clear Secure stock has a trailing yield of around 1.9% on the current share price of US$19.22. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Clear Secure has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Clear Secure

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. An unusually high payout ratio of 223% of its profit suggests something is happening other than the usual distribution of profits to shareholders. 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. Luckily it paid out just 15% of its free cash flow last year.

It's good to see that while Clear Secure's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

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

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Clear Secure's earnings have been skyrocketing, up 106% per annum for the past three years.

Unfortunately Clear Secure has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Is Clear Secure worth buying for its dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Clear Secure is paying out so much of its profit. Overall, it's hard to get excited about Clear Secure from a dividend perspective.

So while Clear Secure looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with Clear Secure and understanding them should be part of your investment process.

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.