3. A. O. Smith Corporation (NYSE:AOS)
Share Price as of September 19: $51.98
Dividend Yield as of September 19: 2.13%
A. O. Smith Corporation (NYSE:AOS) provides water heating and water treatment solutions for both commercial and residential customers. The company is a strong dividend player as it has raised its dividends at a CAGR of 17% in the last five years. It also holds a 28-year track record of consistent dividend growth. The company pays a quarterly dividend of $0.28 per share and has a yield of 2.13%, as of September 19.
In Q2 2022, A. O. Smith Corporation (NYSE:AOS) reported revenue of nearly $969 million, which showed a 12.3% growth from the same period last year. Its net earnings for the quarter also jumped 7% to $126.2 million. In the first six months of the year, the company’s cash provided by operations stood at $54.4 million and its free cash flow came in at $23.7 million.
Following the company’s strong earnings and its net income growth, Citigroup raised its price target on A. O. Smith Corporation (NYSE:AOS) in July to $65 and maintained a Neutral rating on the shares.
At the end of Q2 2022, Impax Asset Management owned roughly $215 million shares in A. O. Smith Corporation (NYSE:AOS), becoming the company’s largest stakeholder. In addition to this, 27 hedge funds owned stakes in the company in Q2, down from 38 in the previous quarter. These stakes hold a combined value of over $387 million.
LRT Capital Management mentioned A. O. Smith Corporation (NYSE:AOS) in its Q2 2022 investor letter. Here is what the firm has to say:
“A.O. Smith is the largest US manufacturer of residential and commercial water heaters, boilers and water treatment products. The company generates close to $3 billion in annual sales. The majority of the company’s business (73%) is done in North America, with the balance coming from China and India. Approximately 80% of demand is replacing existing heaters and 20% is tied to new construction. The company continues to benefit from a shift towards higher efficiency, but more expensive, tankless heaters.
A.O. Smith generates returns on invested capital in the high teens. The company uses its earnings to consistently grow its dividends and share repurchases. Over the past three years the company’s performance has been hurt by its exposure to China as its business there suffered due to the US-China trade war and poor execution. We believe the China business is back on track and the all-important US business is doing better than ever as housing demand heats up in the US. The company beat earnings estimates over the past several quarters and is currently enjoying very good performance as the hot U.S housing market continues to be strong.19 A.O. Smith also recently increased its share repurchase authorization.”
