Assessing the Sustainability and Growth of A.O. Smith Corp's Dividends
A.O. Smith Corp(AOS, Financial) recently announced a dividend of $0.32 per share, payable on 2023-11-15, with the ex-dividend date set for 2023-10-30. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's delve into A.O. Smith Corp's dividend performance and assess its sustainability.
Understanding A.O. Smith Corp's Business
A.O. Smith Corporation manufactures and markets comprehensive lines of residential and commercial gas, gas tankless, and electric water heaters. Supplementary products include water heating equipment, condensing and noncondensing boilers, and water system tanks. The company's two operating segments are by geographic region: North America (majority of total revenue) and the Rest of the World. A material portion of sales in North America derive from replacing existing products, and the company utilizes a wholesale distribution channel and multiple selling locations. The Rest of the World segment sells majorly in Asian countries and operates sales offices to expand distribution and market its product portfolio.
Tracing A.O. Smith Corp's Dividend History
A.O. Smith Corp has maintained a consistent dividend payment record since 1985. Dividends are currently distributed on a quarterly basis. A.O. Smith Corp has increased its dividend each year since 1985. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 38 years.
Dissecting A.O. Smith Corp's Dividend Yield and Growth
As of today, A.O. Smith Corp currently has a 12-month trailing dividend yield of 1.77% and a 12-month forward dividend yield of 1.89%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, A.O. Smith Corp's annual dividend growth rate was 8.20%. Extended to a five-year horizon, this rate increased to 14.20% per year. And over the past decade, A.O. Smith Corp's annual dividends per share growth rate stands at an impressive 21.10%.
Based on A.O. Smith Corp's dividend yield and five-year growth rate, the 5-year yield on cost of A.O. Smith Corp stock as of today is approximately 3.44%.
Evaluating A.O. Smith Corp's Dividend Sustainability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, A.O. Smith Corp's dividend payout ratio is 0.60.
A.O. Smith Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks A.O. Smith Corp's profitability 8 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Exploring A.O. Smith Corp's Growth Metrics
To ensure the sustainability of dividends, a company must have robust growth metrics. A.O. Smith Corp's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and A.O. Smith Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. A.O. Smith Corp's revenue has increased by approximately 10.30% per year on average, a rate that outperforms than approximately 61.6% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, A.O. Smith Corp's earnings increased by approximately -12.10% per year on average, a rate that outperforms than approximately 20.3% of global competitors. Lastly, the company's 5-year EBITDA growth rate of -0.50%, which outperforms than approximately 28.63% of global competitors.
Final Thoughts
Reflecting on A.O. Smith Corp's dividend payments, growth rate, payout ratio, profitability, and growth metrics, it is evident that the company has a solid track record of maintaining and growing dividends. The company's strong profitability and growth metrics further enhance its ability to sustain dividends in the long run. However, investors should continue to monitor these metrics and the company's overall performance to ensure the sustainability of future dividends.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
