Janice R. Andrews
While A.O. Smith Corporation (NYSE:AOS) stands out among dividend stocks with its impressive 32-year dividend growth streak, investors should weigh several factors before crowning it 2025’s top dividend pick. The company’s 8.01% five-year dividend growth rate and recent 6% increase demonstrate its commitment to shareholder returns.
Market Context and Performance The past year saw dividend stocks, including Dividend Aristocrats, underperform the broader market significantly. However, the historical importance of dividends—contributing roughly one-third of total stock returns since 1926—reinforces their role in long-term investment strategies.
Business Foundation and Recent Results A.O. Smith, a water heating and treatment systems leader, faced headwinds in 2024’s third quarter with declining revenue and earnings. Yet, its robust $360 million operating cash flow through September 2024 and strategic expansion through the $120 million Pureit acquisition suggest underlying strength. The company currently offers a 1.99% dividend yield.
Investment Outlook With 29 hedge funds holding over $1 billion in AOS shares, institutional confidence remains strong. However, ranking eighth among dividend growth stocks for 2025, A.O. Smith faces competition from potentially higher-yielding tech and AI investments in the current market environment.
For investors prioritizing steady dividend growth over explosive returns, A.O. Smith represents a balanced choice. Its combination of market leadership, financial stability, and consistent dividend increases makes it a worthy consideration for income-focused portfolios, even if it may not be 2025’s absolute top dividend performer.
