Camping World Holdings' (NYSE:CWH) Shareholders Will Receive A Smaller Dividend Than Last Year
Camping World Holdings, Inc. (NYSE:CWH) has announced it will be reducing its dividend payable on the 29th of September to $0.125, which is 80% lower than what investors received last year for the same period. The dividend yield of 9.1% is still a nice boost to shareholder returns, despite the cut.
See our latest analysis for Camping World Holdings
Camping World Holdings Is Paying Out More Than It Is Earning
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
Earnings per share is forecast to rise by 67.3% over the next year. 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 Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2016, the dividend has gone from $0.32 total annually to $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.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Although it's important to note that Camping World Holdings' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. 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.
The Dividend Could Prove To Be Unreliable
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. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Camping World Holdings you should be aware of, and 2 of them make us uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
