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A. O. Smith Rewards Shareholders With 9% Hike in Dividend Rate

Zacks Equity Research

A. O. Smith Corporation AOS has announced that it is rewarding shareholders in the form of a hike in the quarterly dividend rate.

The company’s share price increased 1.94% yesterday, ending the trading session at $46.34.

We believe that such shareholder-friendly policies of A. O. Smith reflect a strong cash position.

Inside the Headlines

As revealed, the company’s board of directors approved a 9% or 2 cents per share hike in the quarterly dividend rate, which now moved from 22 cents to 24 cents. On an annualized basis, the dividend increased to 96 cents per share from 88 cents.

A. O. Smith will pay the revised dividend on Nov 15, 2019, to shareholders of record as of Oct 31.

Sound Shareholder-Friendly Policies

The company is committed toward rewarding shareholders handsomely through dividend payments and share buybacks. In the last three years (2016-2018), its cash dividend payout per share increased from 48 cents in 2016 to 76 cents in 2018. Further, during these three years, it repurchased shares worth $476.9 million.

In the first half of 2019, the company paid out a cash dividend of 61 cents per share or approximately $74 million in cash to its shareholders. In October 2018, it raised the quarterly dividend rate by 22% to 22 cents.

In June 2019, the company hiked the share buyback authorization from $200 million to $300 million. It repurchased 2.8 million shares for $132.6 million in the first half of 2019. Exiting the period, the company had 6.3 million share buyback authorization remaining.

For 2019, A. O. Smith anticipates repurchasing approximately $300 million worth of shares.

We believe that impressive financial performance in the quarters ahead is likely to enable the company to continue rewarding shareholders handsomely through dividend increments.
    
Earnings Projections and Price Performance

A. O. Smith, with approximately $7.5-billion market capitalization, currently carries a Zacks Rank #3 (Hold). Strengthening of the defensive replacement business as well as healthy liquidity position works in the company’s favor. However, forex woes and ongoing challenges in China remain headwinds. For 2019, the company anticipates adjusted earnings per share of $2.35-$2.41, down from the previously mentioned $2.69-$2.75.

In the past 60 days, the Zacks Consensus Estimate for its earnings has declined 0.4% to $2.37 for 2019 and 0.4% to $2.68 for 2020. Also, these estimates suggest a year-over-year decline of 9.2% for 2019 and growth of 13% for 2020.

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

In the past three months, the company’s share price has increased 2.5% against the industry’s decline of 5%.





Stocks to Consider

Some better-ranked stocks in the Zacks Industrial Products sector are AZZ Inc AZZ, Crawford United Corporation CRAWA and ESCO Technologies Inc ESE. While AZZ and Crawford currently sport a Zacks Rank #1 (Strong Buy), ESCO Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Current-year earnings estimates for the companies have improved in the past 60 days. Further, the average positive earnings surprise for the last four quarters was 2.12% for AZZ, 10.08% for Crawford and 7.02% for ESCO Technologies.

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