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A.O. Smith (AOS) is a Top Dividend Stock Right Now: Should You Buy?
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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
A.O. Smith in Focus
Headquartered in Milwaukee, A.O. Smith (AOS - Free Report) is an Industrial Products stock that has seen a price change of -36.17% so far this year. The maker of water heaters and boilers is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 2.04% compared to the Manufacturing - Electronics industry's yield of 0.52% and the S&P 500's yield of 1.73%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.12 is up 5.7% from last year. In the past five-year period, A.O. Smith has increased its dividend 5 times on a year-over-year basis for an average annual increase of 15.45%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. A.O. Smith's current payout ratio is 35%, meaning it paid out 35% of its trailing 12-month EPS as dividend.
AOS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $3.55 per share, representing a year-over-year earnings growth rate of 19.93%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, AOS is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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A.O. Smith (AOS) is a Top Dividend Stock Right Now: Should You Buy?
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
A.O. Smith in Focus
Headquartered in Milwaukee, A.O. Smith (AOS - Free Report) is an Industrial Products stock that has seen a price change of -36.17% so far this year. The maker of water heaters and boilers is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 2.04% compared to the Manufacturing - Electronics industry's yield of 0.52% and the S&P 500's yield of 1.73%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.12 is up 5.7% from last year. In the past five-year period, A.O. Smith has increased its dividend 5 times on a year-over-year basis for an average annual increase of 15.45%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. A.O. Smith's current payout ratio is 35%, meaning it paid out 35% of its trailing 12-month EPS as dividend.
AOS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $3.55 per share, representing a year-over-year earnings growth rate of 19.93%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, AOS is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).