A.O. SMITH CORP (NYSE:AOS) – A Reliable Dividend Stock with Strong Fundamentals

A.O. SMITH CORP (NYSE:AOS) stands out as a compelling choice for dividend investors, according to our Best Dividend Stocks screener. The company combines a solid dividend profile with strong profitability and financial health, making it a well-rounded candidate for income-focused portfolios.

Dividend Strength

AOS earns a Dividend Rating of 7, reflecting its reliability and sustainability:

• Dividend Yield: At 2.03%, AOS offers a yield above the industry average (1.20%) and outperforms 95% of its peers in the Building Products sector.
• Dividend Growth: The company has increased its dividend at an average annual rate of 7.65% over the past decade, demonstrating consistent growth.
• Payout Ratio: A sustainable 36.8% of earnings are paid as dividends, leaving ample room for reinvestment and future increases.
• Track Record: AOS has paid dividends for at least 10 years without reductions, reinforcing its reliability.

Profitability & Financial Health

Beyond dividends, AOS excels in profitability and financial stability:

• Profitability Rating (9): Strong margins, including a 13.74% net profit margin and 18.82% operating margin, place AOS in the top quartile of its industry.
• Return on Capital: A 22.8% ROIC indicates efficient use of capital, well above the industry average.
• Financial Health (8): With a low debt-to-equity ratio (0.14) and a robust Altman-Z score (7.57), the company maintains a strong balance sheet.

Valuation & Growth Considerations

While AOS is not a high-growth stock, its valuation is reasonable:

• P/E Ratio (17.59): Slightly below the S&P 500 average (26.19), suggesting fair pricing relative to earnings.
• Forward P/E (15.33): More attractive than 62% of industry peers.
• Moderate Growth: Revenue and earnings are expected to grow around 5% annually, supporting steady dividend increases.

For a deeper dive into AOS’s fundamentals, review the full analysis here.

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Disclaimer

This is not investment advice. Always conduct your own research before making investment decisions.