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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Camping World Holdings, Inc. (NYSE:CWH) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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 Camping World Holdings' shares on or after the 13th of December, you won't be eligible to receive the dividend, when it is paid on the 29th of December.
The company's next dividend payment will be US$0.50 per share, and in the last 12 months, the company paid a total of US$1.38 per share. Based on the last year's worth of payments, Camping World Holdings has a trailing yield of 4.8% on the current stock price of $41.25. If you buy this business for its dividend, you should have an idea of whether Camping World Holdings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Camping World Holdings has a low and conservative payout ratio of just 7.2% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 6.8% of its cash flow last year.
It's positive to see that Camping World Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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's earnings per share have plummeted approximately 69% a year over the previous five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Camping World Holdings has delivered an average of 44% per year annual increase in its dividend, based on the past five years of dividend payments.
To Sum It Up
Is Camping World Holdings worth buying for its dividend? Camping World Holdings has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, Camping World Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.
In light of that, while Camping World Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Camping World Holdings that you should be aware of before investing in their shares.
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.
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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.