Why You Should Leave Camping World Holdings, Inc. (NYSE:CWH)’s Upcoming Dividend On The Shelf

It looks like Camping World Holdings, Inc. (NYSE:CWH) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 13th of September, you won’t be eligible to receive this dividend, when it is paid on the 30th of September.

Camping World Holdings’s next dividend payment will be US$0.15 per share. Last year, in total, the company distributed US$0.61 to shareholders. Calculating the last year’s worth of payments shows that Camping World Holdings has a trailing yield of 7.8% on the current share price of $7.85. 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! So we need to investigate whether Camping World Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Camping World Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Camping World Holdings’s dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. 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 46% 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.

NYSE:CWH Historical Dividend Yield, September 8th 2019
NYSE:CWH Historical Dividend Yield, September 8th 2019

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. 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.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, three years ago, Camping World Holdings has lifted its dividend by approximately 24% a year on average.

We update our analysis on Camping World Holdings every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Camping World Holdings? We’re a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: Camping World Holdings has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Curious what other investors think of Camping World Holdings? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

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. Thank you for reading.