Camping World Holdings, Inc. (CWH): 31.55; 8.33% Yield
We are adding a new position to the Triple Play Income portfolio with Camping World (CWH) today.
Camping World is really two companies. One, a network of dealerships and online sales of outdoor equipment, gears and supplies for camping, hunting, fishing, skiing, snowboarding, bicycling, marine and watersports and others.
Second, the company provides a portfolio of services including protection plans, property and casualty insurance programs, travel assistance, roadside assistance, vehicle financing, RV repair, maintenance services and much more.
This is a wide-ranging company of products and services covering a marketplace that has rebounded after the pandemic. You may be a customer of theirs or have used their products in the past. CWH adds the first retail position to our portfolio and gives us another chance to collect premium and dividends from a consumer discretionary company.
The stock got hit along with most of the market in 2022 and sold off making this a bit of a contrarian position. A lot of the softness was related to rising gas prices at the pump as RV’s are not exactly the most fuel-efficient vehicles.
Like a number of retailers, the stock is volatile and subject to consumer demand and economic conditions. The stock price rebounded since the low at the beginning of July and is up almost 35% since after a solid earnings report.
The company is still looking to manage rising costs which has slowed profit and EPS growth even as revenues rise. The sales increases have largely come through the acquisition of smaller brands but its new vehicle prices are up this summer as demand has increased. Management is holding guidance for the year which again has propelled the stock higher.
The dividend at 8.3% is attractive and for now is safe. The cash payout ratio is right around 20% which means there is plenty of cash to support the dividend while one of management’s goals is to continue to attract investors by paying a rich dividend.
Trading the Options
There is solid open interest in the option chains and CWH is very tradeable whether selling puts or covered calls. The implied volatility until recently has been in the 30% to 40% range which has been good for selling premium.
Option volatility across the stock market is down in the last month as knee-jerk reactions to every bit of economic, political, and financial news has eased. We expect to be able to trade CWH through the next 6 to 12 months.
Annual Dividend: $2.50
Effective Annual Yield: 8.33%
5 Year Dividend CAGR: 69.67%
Consecutive Years of Dividend Increases: 2
Earnings Payout Ratio: 30.69%
Cash Payout Ratio: 20.63%
Ex-Dividend Date: Est. mid-September
Dividend Date of Record: TBD
Payout Date: TBD
Dividend Frequency: Quarterly
Last Price: 31.13
P/E Ratio: 5.96
Market Cap: $2.5 B
Next Earnings Report: TBD
The Trade Review:
1. CWH stock sold off and even though it is rebounding, it is more of a contrarian play with a look out over the next year for continued improving financials.
2. The next ex-dividend date has not been announced, but we expect it to be sometime around mid-September.
3. We will start out selling put options to enter this position.
Stock Price: 30.80
Trade: Sell to open CWH 26 Aug 29.50 put
Estimated Credit: $0.70 to $0.75
Implied Volatility: 51.84%
Probability of Out of the Money (OTM): 62.69%
Days to Expiration (DTE): 15
Capital per one contract: $2,950
Cost Basis: $30.10
Risk: Stock retraces and we have to roll our put position out further.
Trade Target Closing Price: $0.05 or less
ACTION: Sell to open CWH 26 Aug 29.50 put for a net credit of around 0.70 to 0.75 for a 2.3% return.
Get notified about new articles, special events, training, and much more
Leave your info below to get more options and trading ideas to your inbox
Yes, send me news to my inbox.