A. O. Smith's (NYSE:AOS) Upcoming Dividend Will Be Larger Than Last Year's

A. O. Smith Corporation (NYSE:AOS) has announced that it will be increasing its periodic dividend on the 15th of November to $0.34, which will be 6.3% higher than last year's comparable payment amount of $0.32. Based on this payment, the dividend yield for the company will be 1.5%, which is fairly typical for the industry.

See our latest analysis for A. O. Smith

A. O. Smith's Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, A. O. Smith was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 25.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

A. O. Smith Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $0.30, compared to the most recent full-year payment of $1.28. This means that it has been growing its distributions at 16% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

A. O. Smith Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. A. O. Smith has impressed us by growing EPS at 9.6% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like A. O. Smith's Dividend

Overall, a dividend increase is always good, and we think that A. O. Smith is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 13 analysts we track are forecasting for A. O. Smith for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.