A.O. Smith (AOS) Dividend Stock Analysis

A.O. Smith Dividend

The A.O. Smith (AOS) dividend has been paid continuously since 1983 and increased for 31 consecutive years; qualifying the company as a Dividend Aristocrat and Dividend Champion.

Current Annualized Dividend: $1.36

A.O. Smith (AOS) Intrinsic Value – Margin of Safety Analysis            

(updated February 2025)

Normalized Diluted Earnings Per Share (TTM): $3.63
Free Cash Flow Per Share (TTM): $3.22
Cash Flow From Operations (CFO) Per Share (TTM): $3.96

Estimated Intrinsic Value:  $66

Target Buy Price Based on Required Margin of Safety =  $66
(Required Margin of Safety Based On Risk Stability Grade:

A = 0%, B = 20%, C = 40%, D = 60%, F = 80%)

Target SELL Price Based on Estimated Intrinsic Value = $93
(Allow Overvaluation Adjusted by Risk Stability Grade:

A = 40%, B = 25%, C = 15%, D = 5%, F = 0%)

Risk / Stability Grade: A

A grade indicates a quality company with a strong balance sheet, high earnings quality, and a positive business environment. These stocks require the slimmest margin of safety within the stock universe.

B grade indicates a company with a good balance sheet, good earning quality, and a stable business environment. The margin of safety required should be greater than stocks with an A grade but less than the average stock.

C grade indicates a company with a sufficient balance sheet, at least average earnings quality, and a reasonably stable business environment. The margin of safety required is greater than A & B stocks, but less than D & F stocks.

D grade indicates a company in good standing but has issues that could affect its stability and long term risks. D rated stocks should require a large margin of safety when purchased.

F grade indicates a company with significant issues that are currently affecting its stability and long term risks. Require an extremely large margin of safety for F rated stocks when purchased.

Financial Risk Grade: A

A grade indicates an extremely low probability of a dividend cut. This rating is reserved for companies with strong balance sheets and/or excellent dividend histories.

B grade indicates a very low probability for a dividend cut.

C grade indicates a low probability for a dividend cut and/or average safety risk.

D grade indicates there are issues that should be considered concerning future dividend payments.

F grade indicates serious dividend safety risks. Investors should complete comprehensive due diligence before investing.

Business Quality Grade: B+

A grade indicates earnings quality is high or far above average.

B grade indicates earnings quality is good and/or above average.

C grade indicates earnings quality is acceptable or average.

D grade indicates earnings quality is poor and requires thoughtful due diligence.

F grade indicates the quality of the earnings is poor or far below average requiring serious due diligence.

Earnings Report: 12/31/24

Company Description

Sector: Industrials
Industry: Diversified Industrials

Company Overview:
A.O. Smith Corporation (AOS) is all about water! The company is a leading global manufacturer of water heating equipment and water treatment products. The company designs and manufactures both residential and commercial water heaters, boilers, and water filtration systems. A.O. Smith’s well-known brands include A.O. Smith, Takagi, and American Water Heaters. With operations in North America, China, and several other countries, A.O. Smith is known for its innovation in energy-efficient and sustainable water heating solutions.

Company Strengths:
A.O. Smith’s strengths include its strong market position in the water heating industry, a diverse product portfolio, and a reputation for innovation. The company benefits from its global presence, particularly in China, where it has significant market share. A.O. Smith’s focus on energy-efficient products positions it well in an increasingly eco-conscious market. Additionally, its strong customer relationships and after-sales service enhance brand loyalty and recurring revenue.

Company Challenges:
A.O. Smith faces challenges such as fluctuating raw material costs and supply chain disruptions that can impact production and profitability. Competition in the water heating and filtration markets is also intense, with both established players and new entrants vying for market share. Economic slowdowns, particularly in key markets like the U.S. and China, can lead to reduced demand for residential and commercial water heating products. Additionally, regulatory pressures around energy efficiency and environmental standards require ongoing investment in product development and compliance.

Disclaimer:
While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.