It’s no secret that the pandemic was good for recreational vehicle (RV) sales.

When no one was flying and everyone was tired of looking at the same walls in their homes, lots of folks took the plunge and bought an RV. Sales for manufacturers and retailers boomed.

But in 2022, as things returned to normal, RV sales couldn’t keep up their frenetic pace.

That makes analyzing the dividend safety of Camping World Holdings (NYSE: CWH) an interesting exercise.

Free cash flow exploded in 2020 but dropped dramatically in 2021 and 2022, as the pandemic likely cannibalized sales for several years into the future. However, this year, free cash flow is forecast to spike back to over $400 million.

I’m a little skeptical that free cash flow will rocket as high as Wall Street thinks it will, as earnings and revenue are both projected to be lower in 2023.

So we have two years of declining free cash flow, which the Safety Net model most definitely does not like. Furthermore, because free cash flow was a minuscule $29 million last year, the $105 million in dividends paid to shareholders gives us a sky-high 362% payout ratio.

In other words, for every $1 in free cash flow that Camping World took in, it paid shareholders $3.62. That’s not sustainable, and the stock’s dividend safety rating gets penalized as a result.

However, if free cash flow comes in at even half of the predicted level for this year, it will be more than enough to afford the dividend.

Camping World pays a $0.625 per share quarterly dividend, which comes out to a robust 11.6% yield.

Additionally, the company often pays special dividends. It did not in 2022 – as last year was a tougher period – but special dividends were somewhat common prior to that.

Still, Safety Net does not take special dividends into account. When looking at quarterly dividends only, we see that the company has never cut the dividend since it began paying one in 2016.

The falling cash flow and too-high payout ratio mean the dividend safety rating is low. But if free cash flow does significantly improve the way Wall Street expects, the stock could get an upgrade next year.

If cash flow doesn’t rebound, the current dividend will be in jeopardy.

Dividend Safety Rating: D

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