A. O. Smith Increases Quarterly Dividend by 8%

A. O. Smith Corporation (AOS) has raised its quarterly common stock cash dividend by 8% to $0.28 per share. The dividend is payable on November 15, 2021, to shareholders of record as of October 29, 2021.

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The company is involved in the manufacturing of residential and commercial water heating equipment and air purification products. (See A. O. Smith stock charts on TipRanks)

AOS’ annual dividend of $1.12 per share now reflects a dividend yield of 1.7% based on Monday’s closing price. Notably, A. O. Smith has been increasing cash dividends paid to its shareholders each year for over 25 years.

As of June 30, 2021, the company had 5,635,167 million shares remaining on the share repurchase authority. A. O. Smith plans to spend about $400 million on stock repurchases in 2021 through a combination of its Rule 10b5-1 automatic trading plan and opportunistic repurchases in the open market.

The Chairman and CEO of A. O. Smith, Kevin Wheeler, said, “Our dividend increase today reflects our confidence in the large, stable replacement demand inherent in our water heating business, as well as our focus on returning capital to shareholders.”

Following the announcement, Stifel Nicolaus analyst Nathan Jones maintained a Hold rating on A. O. Smith but lowered the price target to $69 (upside potential of 7.5%) from $72.

Also, a week ago, Robert W. Baird analyst Michael Halloran upgraded the stock’s rating to Buy from Hold and raised the price target to $85 from $82. The new price target implies upside potential of 32.5% from current level.

Halloran noted, “We believe an attractive entry point has materialized following recent underperformance (-16% vs -5% S&P since 9/1), reflecting a disconnect to the fundamental setup ahead on (eventual) favorable price/cost dynamics, upside to volume expectations, numerous buffer points to residential in 2022+ (price carryover, lean channel inventory, commercial WH/boilers recovery, water treatment, regulatory environment/favorable mix shifts), overdone China concerns, and significant capital deployment optionality.”

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Consensus among analysts is a Hold based on 1 Buy and 3 Holds. The average A. O. Smith price target stands at $75.67 and implies upside potential of 17.9%.

According to TipRanks’ Smart Score system, A. O. Smith gets a 6 out of 10, which indicates that the stock is likely to perform in line with market averages.