Assessing A. O. Smith's (AOS) Valuation Following a 6% Dividend Increase

On October 13, A. O. Smith (AOS) announced that its board approved a 6% increase to the company’s quarterly cash dividend. The payout will be raised to $0.36 per share for both Common and Class A Common Stock.

See our latest analysis for A. O. Smith.

While A. O. Smith has increased its dividend, the share price hasn’t followed a straightforward upward path. The stock is up 3.2% over the past week after a dip last month, showing yearly momentum but a 1-year total shareholder return of -7.4%. Over the longer term, however, total shareholder returns remain solid thanks to dividends and long-term growth, with a 44% three-year return keeping investors engaged.

If steady payouts and resilient performance are on your radar, now’s a timely chance to discover fast growing stocks with high insider ownership.

With the dividend rising but shares lagging, the question now is whether A. O. Smith is undervalued and ripe for a turnaround, or if the current price already reflects the company's future prospects.

Most Popular Narrative: 11.1% Undervalued

The most widely followed narrative points to a fair value nearly $9 above A. O. Smith's last close, highlighting analyst conviction in future earnings growth. The current price leaves a meaningful discount versus these upside projections, creating a notable valuation gap.

“Increasing regulatory focus on energy efficiency and sustainability in water heating is prompting A. O. Smith to accelerate investment and launch new high-efficiency and smart products (e.g., condensing boilers, tankless water heaters, IoT-connected filtration systems). This strategic product mix shift is expected to grow revenue and expand gross margins over time.”

Read the complete narrative.

This is not your average value story. The fair value hinges on ambitious projections for margin expansion driven by portfolio adjustments and a bet on digital innovation. Want to see what bold assumptions underpin this double-digit upside?

Result: Fair Value of $79.83 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent weakness in China or further cost pressures could quickly offset expected gains and challenge the optimistic growth outlook.

Find out about the key risks to this A. O. Smith narrative.

Build Your Own A. O. Smith Narrative

If you see the story differently or would like to dive into your own analysis, it only takes a few minutes to create your perspective: Do it your way.

A great starting point for your A. O. Smith research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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.

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