RV Stocks: A Comfortable Way to Ride Falling Interest Rates

investing.com:

RV stocks have been struggling to regain traction following the social-distancing craze that drove them to record highs. The problems were rising prices and an inventory glut compounded by high interest rates.

Now, data from the RVIAA suggests that industry normalization is at hand, and growth will resume in 2024. This outlook will be compounded by falling interest rates and increasing affordability, providing a path to higher share prices for these and other consumer discretionary stocks.

Data published by the RVIA in its Winter 2024 RV Roadsigns report suggest 11% to 16% growth in 2024. This pace outstrips growth expectations for the four leading RV manufacturers and Camping World at the low end of the range. This sets them up to outperform in 2024 while delivering solid capital returns to investors.

Winnebago Industries Inc (NYSE:WGO) had a mixed quarter, with top and bottom lines diverging from consensus in different directions.

However, the takeaway from the report is that the year-over-year (YOY) decline aligns with the industry shipment reports and forecast; it is shrinking sequentially, and guidance is optimistic that growth will return in the second half of the year. Until then, the company's cash flow has been impacted by deleveraging but is still sufficient to sustain operations, pay dividends, and repurchase shares while maintaining a fortress balance sheet.

Winnebago does not have a high yield of 1.65%, but it has a reliable payout of 15% of earnings and has a positive outlook for distribution increases. Distribution increases may not remain as robust as the 17% CAGR the company is running, but they are expected.

As it is, Winnebago returned $50 million in FQ1 in dividends and share repurchases while