AOS - A. O. Smith: A High-Quality Dividend Growth Compounder To Put On Your Watchlist

2024-03-11 12:35:12 ET

Summary

• A. O. Smith Corporation is a dominant company in its sector with a proven business model, almost guaranteeing dividend increases despite economic cycles.
• The company has a strong balance sheet, good growth prospects and an excellent capital allocation strategy for the long-term dividend growth investor.
• AOS has reported record sales and FCF in FY 2023, which allows them to invest into further growth and reward shareholders in the form of dividends and share repurchases.
• Based on discounted cash flow analysis, the fair value of AOS stock is $74.78 per share, which means it is 14.7% overvalued compared to the current share price.

Investment thesis

There is nothing better than having a number of stocks in your portfolio that increase their dividend like clockwork. There are plenty of people who don't invest in boring stocks, while I think we should embrace boring sometimes. Companies that are dominant in their sector and have a proven business model. These companies keep growing earnings and can almost guarantee dividend increases despite the influence of the economic cycle....

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