You've Got One 'Smore' Chance With This Dividend Stock

Calling shares of Camping World on fire since its March 2020 fall feels like something of an understatement. Now, many might have missed out on the name's meteoric rise after shares were bottoming around $4 in late March last year, as the pandemic exploded on the world. But there's still a chance for dividend-hunting investors, who are getting a fresh bite at the CWH apple, following a sizable dividend increase that offers a sizable dividend yield. A Big Tent The company is the largest domestic retailer of recreational vehicles and derives about half of its revenue from the sale of new vehicles and roughly 25% from used ones. The other 25% of its revenue stream is composed of other related products and service plans. What's interesting, and likely not well known, is the company has a three-pronged revenue model that spans recurring revenue from its service plans, a large install base that drives repeat customers, and what it calls first-time buyer revenue, all of which is carried out across its 186 dealerships and service centers across the U.S. The Trip Down: The Pandemic In March last year, the company's business took a hit as many state and local governments issued stay-at-home and shelter-in-place restrictions. Those same rules also led to production suspensions at key suppliers, including Thor Industries , Forest River, and Winnebago Industries that led to a sharp drop in second quarter 2020 RV shipments according to data published by the RV Industry Association. As we moved through those first few months of the pandemic, with people looking to get out of the house, be it to work or be in a preferred environment, in early May of last year, Camping World saw significant improvements in its online web traffic levels. As the stay-at-home restrictions began to ease across certain areas of the country, the company saw in-store and online traffic grow rapidly, and so did revenue, which led it to post double-digit revenue growth in 2020. And even though restrictions eased earlier in the year, RV shipments have remained strong, up 57.% year-to-year for the January to July 2021 period. That strength in demand translated into a more than 78% year-over-year revenue increase for Camping World during the first half of 2021. And for those looking for a classic example of operating leverage, for the first six months of 2021, the company reported EPS of $3.74 compared to the $1.32 for the same period in 2020. Cash flow from operations remained strong leaving it with $191.5 million in cash exiting the quarter compared to $166 million at the end of 2020. Here's the cherry on top: Exiting June, Camping World had $150.9 million contracts in transit, up from $48.2 million at the end of 2020. Why is this important? Per the company's financial filings, Contracts in transit represent amounts due from third-party lenders from whom pre-arranged agreements have been determined, and to whom the retail installment sales contracts have been assigned. In simpler terms, Camping World is waiting to collect full payment for sold units financed by other parties. This means, more cash flow is on the way. Quarter-ly Dividend Based on the strength of its business, Camping World in April announced a $0.02 per share per quarter boost to its dividend to $0.25. It followed up on that announcement with a far more sizable increase to $0.50 per share per quarter in late August. That latest upsizing of the dividend equates to $2.00 per share on an annualized basis and a dividend yield of about 5%, well ahead of the analogous one for the S&P 500. With 47.3 million common shares outstanding exiting the June quarter, the company has ample funds to meet those expected dividend payments for the coming few years. One risk I see is the eventual downturn in RV demand, and I would recommend dividend hunters and other investors who want to take advantage of Camping World's position in the RV market keep tabs on RV industry shipments. In other words, pay attention to the monthly data from the RV Industry Association, and remember that a one-month decline isn't a signal for a downturn in the industry. If you see three months of declining orders, you may want to revisit your position in CWH shares.

You've Got One 'Smore' Chance With This Dividend Stock

Let's look at the stock of Camping World and why you might want in, even if you missed out on the CWH's early meteoric rise.

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