We Wouldn't Be Too Quick To Buy Camping World Holdings, Inc. (NYSE:CWH) Before It Goes Ex-Dividend

Camping World Holdings, Inc. (NYSE:CWH) is about to trade ex-dividend in the next four 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Camping World Holdings' shares before the 13th of December in order to be eligible for the dividend, which will be paid on the 30th of December.

The company's next dividend payment will be US$0.125 per share. Last year, in total, the company distributed US$0.50 to shareholders. Based on the last year's worth of payments, Camping World Holdings has a trailing yield of 2.0% on the current stock price of US$24.69. If you buy this business for its dividend, you should have an idea of whether Camping World Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Camping World Holdings has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Camping World Holdings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Camping World Holdings 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 Camping World Holdings 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. Fortunately, it paid out only 30% of its free cash flow in the past year.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Camping World Holdings 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Camping World Holdings has delivered 5.7% dividend growth per year on average over the past eight years.

Get our latest analysis on Camping World Holdings's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Camping World Holdings? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Camping World Holdings.

With that being said, if you're still considering Camping World Holdings as an investment, you'll find it beneficial to know what risks this stock is facing. To that end, you should learn about the 4 warning signs we've spotted with Camping World Holdings (including 1 which is potentially serious).

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.