A.O. SMITH CORP (NYSE:AOS) stands out as a compelling choice for dividend investors, according to our Best Dividend Stocks screen. The company combines a solid dividend profile with strong profitability and financial health, making it a well-rounded candidate for income-focused portfolios.
Key Strengths for Dividend Investors
1. Attractive and Growing Dividend
- AOS offers a dividend yield of 2.12%, which is above the industry average of 1.24%.
- The company has increased its dividend for at least 10 consecutive years, with an annual growth rate of 7.65%.
- The payout ratio of 36.8% is sustainable, indicating room for future dividend hikes without straining earnings.
2. Strong Profitability
- AOS earns a Profitability Rating of 9/10, reflecting efficient operations.
- Return on Invested Capital (ROIC) of 22.8% ranks in the top 5% of its industry.
- Healthy profit margins, including an operating margin of 18.82%, suggest consistent earnings power.
3. Solid Financial Health
- With a Health Rating of 8/10, AOS maintains a strong balance sheet.
- A low debt-to-equity ratio of 0.14 reduces financial risk.
- The company generates ample free cash flow, supporting dividend sustainability.
Valuation Considerations
While AOS is not the cheapest stock in its sector, its forward P/E of 14.86 is reasonable compared to both industry peers and the broader S&P 500. Given its reliable dividend growth and strong fundamentals, the valuation appears justified.
For a deeper dive into the company’s financials, review the full fundamental report for AOS.
Our Best Dividend Stocks screener provides more high-quality dividend ideas, updated daily.
Disclaimer
This is not investment advice. The analysis reflects observations at the time of writing, but investors should conduct their own research before making decisions.
