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A. O. Smith's (AOS) Board Okays 8% Hike in Dividend Rate

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A. O. Smith Corporation (AOS - Free Report) announced rewards for its shareholders in the form of a hike in the quarterly dividend rate.

We believe that such shareholder-friendly policies of the company reflect a strong cash position and belief in future growth.

Inside the Headlines

Its board of directors approved an 8% hike in the quarterly dividend rate. The rate now stands at 26 cents per share. The previous quarterly dividend rate was 24 cents. On an annual basis, the dividend rate now stands at $1.04 per share, up from the previous rate of 96 cents.

The company will pay the revised quarterly dividend on Nov 16, 2020, to shareholders of record as of Oct 30.

Sound Shareholder-Friendly Policies

The company is committed toward rewarding shareholders handsomely through dividend payments and share buybacks.

In the last three years (2017-2019), its cash dividend payout per share increased from 56 cents in 2017 to 90 cents in 2019. Also, the company’s payouts were 48 cents per share or $77.8 million in the first half of 2020.

Share repurchases by the company totaled $629.4 million in the last three years. Also, it bought back shares worth $56.7 million in the first half of the current year. Exiting the second quarter of 2020, the company was left to repurchase 1.6 million shares.

In the pandemic-stricken environment, A. O. Smith temporarily suspended its share buyback activities, while made no change to its dividend plans. We believe that impressive financial performance in the quarters ahead might enable the company to continue rewarding shareholders handsomely through dividend increments or revive its share-buyback activities.

Zacks Rank & Estimates Trend

With a market capitalization of $9.2 billion, A. O. Smith currently carries a Zacks Rank #3 (Hold). The company is well-poised to gain from strengthening replacement business, healthy liquidity position and acquired assets. However, market weakness caused by the pandemic is concerning.

In the past three months, the company’s shares have gained 13.2% compared with 12.8% growth recorded by the industry.




 

In the past 60 days, A. O. Smith’s earnings estimates have been decreased by 0.5% to $1.82 for 2020 and 0.4% to $2.25 for 2021. Also, the consensus estimate for the third quarter of 2020 has fallen 2% to 50 cents.

A. O. Smith Corporation Price and Consensus

 

A. O. Smith Corporation Price and Consensus

A. O. Smith Corporation price-consensus-chart | A. O. Smith Corporation Quote

Stocks to Consider

Some better-ranked stocks in the industry are Emerson Electric Co. (EMR - Free Report) , EnerSys (ENS - Free Report) and Regal Beloit Corporation (RBC - Free Report) . All these stocks carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Current-year earnings estimates for the companies have improved for EnerSys and Regal Beloit, while have remained unchanged for Emerson in the past 60 days. Further, the positive earnings surprise in the last reported quarter was 31.15% for Emerson, 35.29% for EnerSys and 46.15% for Regal Beloit.

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