Why SMITH (A.O.) CORP (NYSE:AOS) provides a good dividend, while having solid fundamentals.

Take a closer look at SMITH (A.O.) CORP (NYSE:AOS), a stock of interest to dividend investors uncovered by our stock screener. AOS excels in fundamentals and provides a decent dividend, all while maintaining a reasonable valuation. Let's break it down further.

Dividend Analysis for AOS

ChartMill assigns a proprietary Dividend Rating to each stock. The score is computed by evaluating various valuation aspects, like the yield, the history, the dividend growth and sustainability. AOS was assigned a score of 7 for dividend:

• Compared to an average industry Dividend Yield of 1.27, AOS pays a better dividend. On top of this AOS pays more dividend than 97.50% of the companies listed in the same industry.
• On average, the dividend of AOS grows each year by 7.65%, which is quite nice.
• AOS has been paying a dividend for at least 10 years, so it has a reliable track record.
• AOS has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
• AOS pays out 35.68% of its income as dividend. This is a sustainable payout ratio.

Health Assessment of AOS

ChartMill assigns a proprietary Health Rating to each stock. The score is computed by evaluating various liquidity and solvency ratios and ranges from 0 to 10. AOS was assigned a score of 7 for health:

• AOS has an Altman-Z score of 6.91. This indicates that AOS is financially healthy and has little risk of bankruptcy at the moment.
• AOS's Altman-Z score of 6.91 is amongst the best of the industry. AOS outperforms 85.00% of its industry peers.
• AOS has a debt to FCF ratio of 0.41. This is a very positive value and a sign of high solvency as it would only need 0.41 years to pay back of all of its debts.
• AOS has a better Debt to FCF ratio (0.41) than 87.50% of its industry peers.
• A Debt/Equity ratio of 0.10 indicates that AOS is not too dependend on debt financing.
• AOS has a Debt to Equity ratio of 0.10. This is in the better half of the industry: AOS outperforms 75.00% of its industry peers.
• The current and quick ratio evaluation for AOS is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

A Closer Look at Profitability for AOS

ChartMill assigns a proprietary Profitability Rating to each stock. The score is computed by evaluating various profitability ratios and margins and ranges from 0 to 10. AOS was assigned a score of 8 for profitability:

• Looking at the Return On Assets, with a value of 16.47%, AOS belongs to the top of the industry, outperforming 92.50% of the companies in the same industry.
• The Return On Equity of AOS (28.33%) is better than 80.00% of its industry peers.
• AOS has a better Return On Invested Capital (23.53%) than 95.00% of its industry peers.
• Measured over the past 3 years, the Average Return On Invested Capital for AOS is significantly above the industry average of 12.93%.
• The 3 year average ROIC (18.84%) for AOS is below the current ROIC(23.53%), indicating increased profibility in the last year.
• Looking at the Profit Margin, with a value of 13.98%, AOS is in the better half of the industry, outperforming 72.50% of the companies in the same industry.
• In the last couple of years the Profit Margin of AOS has grown nicely.
• The Operating Margin of AOS (19.00%) is better than 75.00% of its industry peers.
• In the last couple of years the Operating Margin of AOS has grown nicely.
• Looking at the Gross Margin, with a value of 38.14%, AOS is in the better half of the industry, outperforming 70.00% of the companies in the same industry.

More Best Dividend stocks can be found in our Best Dividend screener.

For an up to date full fundamental analysis you can check the fundamental report of AOS

Keep in mind

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.