Camping World Holdings (NYSE:CWH) Is Reducing Its Dividend To $0.125

The board of Camping World Holdings, Inc. (NYSE:CWH) has announced it will be reducing its dividend by 80% from last year's payment of $0.625 on the 29th of September, with shareholders receiving $0.125. The yield is still above the industry average at 9.1%.

See our latest analysis for Camping World Holdings

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 272% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

The next 12 months is set to see EPS grow by 67.3%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 192% over the next year.

Camping World Holdings Is Still Building Its Track Record

Camping World Holdings' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2016, the annual payment back then was $0.32, compared to the most recent full-year payment of $2.50. This implies that the company grew its distributions at a yearly rate of about 34% over that duration. Camping World Holdings has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Camping World Holdings May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, Camping World Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year. With such low earnings growth, paying out more than double what it is earning is setting up Camping World Holdings to have to cut earnings in the future.

Camping World Holdings' Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Camping World Holdings has 4 warning signs (and 2 which are potentially serious) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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