In a shareholder-friendly move, A. O. Smith Corporation AOS recently announced a hike in its dividend payout. The company increased its quarterly dividend by 6% to 38 cents per share (annually: $1.52). The company will pay the new dividend on Nov. 16, 2026, to shareholders of record as of Oct. 30.
The move underscores A. O. Smith’s sound financial health as it utilizes free cash flow to enhance its shareholders’ returns. The five-year compound annual growth rate of its dividend is 6.2%. The company has increased its dividend consecutively for more than 30 years. Before this, it had hiked its dividend by 6% to 36 cents per share in October 2025.
Sound Capital-Allocation Strategies
Strong cash flows allow A. O. Smith to deploy capital effectively to reward shareholders through dividend payments and share buybacks. In the first six months of 2026, the company generated operating cash flow of $253.8 million, while its free cash flow totaled $233.3 million.
In the same period, the company paid dividends of $99.8 million, up 2.4% year over year. In the same period, it repurchased 2.6 million shares for approximately $162.4 million. While exiting the second quarter of 2026, A. O. Smith had 3.2 million shares remaining under its existing repurchase authorization. It is worth noting that, in January 2026, the company’s board boosted the buyback program by another 5 million shares. For 2026, AOS expects to repurchase shares worth approximately $300 million.
Zacks Rank & Price Performance
A. O. Smith currently carries a Zacks Rank #3 (Hold). The company is benefiting from higher demand for water treatment and residential boilers within the North America segment. However, it is witnessing softness in the Rest of the World segment due to lower volumes of residential water treatment and water heater products in China.
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In the past month, the company’s shares gained 1.2% compared with the industry’s 8.5% growth.
The Zacks Consensus Estimate for AOS’ 2026 earnings has been stable over the past 60 days at $3.74 per share.
3 Promising Stocks
Some better-ranked stocks from the same space are discussed below.
Applied Industrial Technologies AIT currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AIT delivered a trailing four-quarter average earnings surprise of 4.3%. In the past 60 days, the Zacks Consensus Estimate for Applied Industrial’s fiscal 2027 (ending June 2027) earnings has increased 0.5%.
Emerson Electric Co. EMR currently carries a Zacks Rank of 2. EMR delivered a trailing four-quarter average earnings surprise of 1.3%. In the past 60 days, the Zacks Consensus Estimate for Emerson’s fiscal 2026 (ending September 2026) earnings has increased 0.2%.
Eaton Corporation plc ETN currently carries a Zacks Rank of 2. Eaton delivered a trailing four-quarter average earnings surprise of 1.3%. In the past 60 days, the Zacks Consensus Estimate for ETN’s 2026 earnings has increased 0.6%.
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A. O. Smith Corporation (AOS): Free Stock Analysis Report
Emerson Electric Co. (EMR): Free Stock Analysis Report
Eaton Corporation, PLC (ETN): Free Stock Analysis Report
Applied Industrial Technologies, Inc. (AIT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).