Camping World Holdings' (NYSE:CWH) Dividend Will Be $0.625

The board of Camping World Holdings, Inc. (NYSE:CWH) has announced that it will pay a dividend on the 29th of June, with investors receiving $0.625 per share. This makes the dividend yield 9.1%, which will augment investor returns quite nicely.

Check out our latest analysis for Camping World Holdings

Camping World Holdings Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 112% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 47%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Earnings per share is forecast to rise by 16.5% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 144%, which is a bit high and could start applying pressure to the balance sheet.

Camping World Holdings Doesn't Have A Long Payment History

It is great to see that Camping World Holdings has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 6 years was $0.32 in 2017, and the most recent fiscal year payment was $2.50. This means that it has been growing its distributions at 41% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth Could Be Constrained

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Camping World Holdings has been growing its earnings per share at 23% a year over the past five years. Although earnings per share is up nicely Camping World Holdings is paying out 112% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Camping World Holdings' payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Camping World Holdings that investors should know about before committing capital to this stock. Is Camping World Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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