RV demand may have peaked, but ownership is still high. While RV manufacturers like Thor Industries (NYSE: THO) and Winnebago (NYSE: WGO) are tied more closely to demand, others, like Camping World (NYSE: CWH) and LCI Industries (NYSE: LCII), have more exposure to ownership and that is driving their underlying business. This matters because Camping World and LCI Industries are two high-yielding stocks on track for sustainable dividend increase cycles and they both trade at deep values relative to other high-yielding names in the market. The caveat is that all RV names are trading at deep values relative to the broader market, so the value may be tenuous, but there is something to take note of. Winnebago and Thor Industries are both trading near 4X their earnings while Camping World and LCI trade closer to 6X; the market is giving them a premium and it’s due in part to the dividends.
Camping World Rockets Higher On Record Results
Camping World shares are up more than 20% in the wake of its results, and it is still offering value. The company reported a record $2.2 billion in net sales for a gain of 6.8% over the last year, which beat the consensus by 830 basis points as well. The strength was driven by supply chain easing that allowed a near 80% build-up in inventory, a build-up that in turn drove sales and deliveries. The only bad news is that margins were eroded by higher costs for new vehicles, but the 380 basis point contraction was much less than feared. The adjusted $2.16 in revenue is down versus last year because of it, but that is the only bad news. The earnings beat the consensus by $0.37 or more than 2000 basis points and are ample enough to sustain the robust dividend outlook.
Camping World pays what is now an 8% dividend yield, and it is a safe payout even at this level. The company is paying only 21% of the full-year consensus, and it looks like the consensus estimates will rise and push the ratio even lower. The key takeaway is that even if (when) business and/or the industry plateaus and pulls back; there is sufficient cash and cash flow to sustain distribution growth for many years. 
LCI Industries Ready To Serve Up A Dividend Increase
If LCI Industries holds true to form and extends its streak of annual distribution increases to 7 years, the next declaration will include that increase and it could be a big one. The company has been raising the payout at a 12% CAGR for the last five years and has lots of cash flow on the books for another. The payout ratio for this year is an expected 30%, with Q2 results outperforming consensus by 2000 basis points, and the long-term outlook is just as good. Next year’s payout ratio, which might be a better barometer given the peak in industry demand, is still a safe 30% of earnings, and the odds are the estimate is too low.
In the near term, OEM demand is driving sales, with the value of LCII product per RV up 49% YOY to 49% of the cost per RV. That’s a whopping amount of market share and one that gives the company a large moat. On the after-market side which is 16% of sales, sales are up 14% YOY and will be driven by high demand over the long-term that is related to today’s fast-paced RV sales rate. All those RVs will need upgrades, updates, and maintenance.
The price action in LCII shares popped and then collapsed following the earnings report but the volatility is related to a potential reversal that is in play. The stock fell more than 37% from its peak to its bottom earlier this year and it is now trying to reverse course. The post-release action hast the market testing for support at a previous resistance point that could lead to another bounce. If the market can keep its feet under it and hold support above the 150-day moving average, a move up to $140 and $150 is expected. If not, this stock could become range bound below the $140 level. 
