The water business is a highly profitable one with growth opportunities, making it appealing for dividend growth investors. People always need clean water, regardless of the state of the economy. In turn, many top water stocks have regular customer bases and very consistent revenues and earnings. A.O. Smith (AOS) is a name to consider, outlines Bob Ciura, contributing editor at Sure Dividend.
This great stability paves the way for water stocks to pay growing dividends to shareholders. In fact, many water stocks have extremely long histories of increasing dividends. Some have even reached Dividend Aristocrat status, which means they have raised dividends for at least 25 consecutive years.
A.O. Smith is a leading manufacturer of residential and commercial water heaters, boilers, and water treatment products. A.O. Smith generates the majority of its sales in North America, with the remainder from the rest of the world. It has category-leading brands across its various geographic markets. The company is on the Dividend Aristocrats list.
A.O. Smith (AOS)
A.O. Smith reported its first-quarter earnings results on April 28. The company generated revenues of $970 million during the quarter, which represents a decline of 1% compared to the prior year’s quarter. A.O. Smith’s revenues were up slightly in North America, while revenues saw a decline in the rest of the world, with currency rate movements explaining some of that downward move in international markets.
A.O. Smith generated earnings-per-share of $0.94 during the first quarter, which was up 22% on a year-over-year basis. The company is also now forecasting earnings-per-share in a range of $3.30 to $3.50 in 2023. At the midpoint of the guidance range, A.O. Smith’s earnings-per-share would be up 8%.
Thanks to a healthy housing market in the US, the company has enjoyed consistent growth in the domestic market throughout most of the last decade. A.O. Smith’s sales performance was even more impressive in China, where sales have grown by ~20% per year on average during the last decade. China’s huge population, its robust GDP growth, and the booming of its middle class are major tailwinds in this important market.
Recommended Action: Buy AOS.