The list contains Apple (AAPL), with a dividend growth grade of A+ and a massive market cap of $4.05T. Applied Industrial Technologies (AIT), Applied Materials (AMAT), A. O. Smith (AOS) and Amphenol (APH) have achieved the highest possible dividend growth grade of A+.

Notable performers include Colgate-Palmolive Company (CL), which posted a 23.33% one-month performance, and A. O. Smith Corporation (AOS) with a 14.01% gain over the same period. The list represents diverse industries ranging from Semiconductor Materials & Equipment to Household Products and Consumer Staples Merchandise Retail.

The dividend growth grade is a component of Seeking Alpha’s comprehensive dividend scoring system that evaluates a company’s track record of increasing its dividend payments over time. This grade specifically measures the consistency and magnitude of dividend increases, helping investors assess whether a company is committed to growing shareholder returns through regular dividend raises.

The grades are given on a scale from A+ to F, with A+ being the best. Any grade of B- or above is considered a Buy. A grade of D+ or below is considered a Sell.

Here is the list:

1. Apple Inc. (AAPL), Dividend growth grade: A+

2. Applied Industrial Technologies, Inc. (AIT), Dividend growth grade: A+

3. Applied Materials, Inc. (AMAT), Dividend growth grade: A+

4. A. O. Smith Corporation (AOS), Dividend growth grade: A+

5. Amphenol Corporation (APH), Dividend growth grade: A+

6. Broadcom Inc. (AVGO), Dividend growth grade: A+

7. Booking Holdings Inc. (BKNG), Dividend growth grade: A+

8. Colgate-Palmolive Company (CL), Dividend growth grade: A+

9. Costco Wholesale Corporation (COST), Dividend growth grade: A+

10. Crane Company (CR), Dividend growth grade: A+

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Adjusted earnings of $0.90 a share beat the consensus estimate of $0.84, while fourth-quarter revenue was $912.5 million, missing analysts’ expectations of about $928 million.

Net income rose to $125.4 million, or $0.90 a share, from $109.7 million, or $0.75 a share, a year earlier, reflecting improved profitability despite flat sales.

Margins and regional performance

The company benefited from higher pricing and stronger results in commercial water heaters and boilers, particularly in North America. Segment margins expanded year over year, supported by pricing actions and cost controls that offset higher input costs.

Results outside North America remained pressured by weak demand in China, though margins improved following restructuring actions taken last year. Growth in India and contributions from recent acquisitions partially offset lower China volumes.

“I am pleased with the resilience and focus our team showed through the fourth quarter,” A.O. Smith (AOS) Chief Executive Officer Steve Shafer said in a statement, citing profitability gains and continued strength in commercial markets.

Cash flow and capital returns

A.O. Smith (AOS) generated $616.8 million in operating cash flow and $546.0 million in free cash flow during 2025, both higher than the prior year. The company repurchased 5.9 million shares for $400.8 million and approved a quarterly dividend of $0.36 per share, extending its dividend payment streak to 86 years.

2026 outlook

Looking ahead, A.O. Smith (AOS) forecast 2026 net sales of $3.9 billion to $4.02 billion and earnings per share of $3.85 to $4.15, ahead of the consensus estimate of $3.80. Management expects continued challenges in China, stable to softer residential demand in North America and double-digit sales growth in India.

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Management View

• CEO Stephen Shafer highlighted that “2025 sales increased slightly as pricing benefits and higher commercial water heater and boiler volumes were offset by lower China sales.” He noted a “record EPS” for the company, citing a 6% increase to $3.85 and improved segment profitability. Shafer discussed the completion of the Leonard Valve acquisition, stating, “This acquisition expands our water management market reach, digital capabilities and integrated product portfolio.”
• Shafer emphasized that North America water heater sales rose 1% in 2025, with commercial volumes offsetting wholesale residential softness due to new construction slowdown. He pointed out, “North America boiler sales grew 8% compared to 2024,” and that water treatment sales decreased 2% as the company shifted focus from on-the-shelf retail to more profitable channels.
• The CEO described China sales as down 12% in local currency, attributing this to economic weakness and discontinued government subsidies, but noted restructuring and expense management aided margin expansion.
• CFO Charles Lauber reported, “We delivered sales of $3.8 billion in 2025, a slight increase over last year. 2025 earnings were $3.85 per share compared with adjusted earnings of $3.73 per share in 2024.” He added, “North America segment earnings of $728 million increased 2% compared with 2024 adjusted segment earnings. Segment margin was 24.4%, an increase of 20 basis points year-over-year.”
• Lauber stated, “We generated strong free cash flow of $546 million during 2025, a 15% increase over 2024, primarily driven by lower year-over-year capital investments as well as higher earnings and the benefit of a onetime tax adjustment.”

Outlook

• The company projects a 2026 EPS range of $3.85 to $4.15 per share. Lauber said, “The midpoint of our EPS range represents 4% growth over our 2025 EPS.”
• A. O. Smith expects 2026 CapEx between $70 million and $80 million, free cash flow between $525 million and $575 million, and interest expense of $30 million to $40 million. The company plans to repurchase approximately $200 million of stock in 2026, with an approved 5 million additional shares.
• Shafer stated, “We project that 2026 U.S. residential industry unit volumes will be flat to down compared to 2025,” and expects U.S. commercial water heater industry volumes to “increase mid-single digits in 2026” ahead of regulatory changes. Boiler sales in North America are projected to grow 6% to 8%, and water treatment sales are expected to grow 10% to 12%. China sales are projected to decrease mid-single digits, with a challenging first half and expected recovery in the second half of 2026.

Financial Results

• Fourth quarter 2025 sales were $913 million, flat year-over-year. Fourth quarter earnings were $0.90 per share, a 6% increase over the prior year’s $0.85.
• North America segment Q4 sales were $714 million, up 3% year-over-year. Segment margin was 23.1%, a 70 basis point improvement. Rest of the World segment Q4 sales were $206 million, down 13%, with a segment margin of 7.8% compared to 8.1% last year.
• Free cash flow for 2025 was $546 million. The company returned $597 million to shareholders via dividends and repurchases, including $401 million in share repurchases.

Q&A

• Jae Hyun Ko, Jefferies: Asked about persistent residential volume weakness. Lauber explained, “Where we’re seeing some headwind is kind of the new home completions, multifamily and single family.”
• Ko, Jefferies: Inquired about China guidance and return to growth. Shafer said, “The return to growth will be partly driven by as we move past that phase and we get back to the remodel wins and the refurbishments that still need to happen in China.”
• Michael Halloran, Baird: Sought more context on wholesale channel competition. Shafer responded, “The dynamic of low new home construction…and the fact that retail has made some inroads in terms of share gains overall in the industry is just putting pressure on that part of the channel.”
• Mitchell Moore, KeyBanc: Asked about Leonard Valve’s growth. Shafer said, “In terms of the end markets, they’re very strong in kind of the commercial markets,” and Lauber noted, “the business has been growing double digits.”
• Bryan Blair, Oppenheimer: Questioned water management platform prospects. Shafer indicated the move expands opportunities and the company has a “healthy pipeline of where we could go to do that.”
• Scott Graham, Seaport: Probed on wholesale residential channel pressures. Shafer clarified, “I don’t think the characterization of a jump ball is what’s happening…the dynamics itself are not new.”
• Ethan Coyle, JPMorgan: Asked about scaling India. Shafer focused on leveraging the Pureit addition and ongoing innovation.
• Nathan Jones, Stifel: Asked for clarification on steel price outlook. Lauber stated, “That 10% up is the year-over-year average.”

Sentiment Analysis

• Analysts expressed cautious and probing sentiment, focusing on competitive pressures, China headwinds, and the sustainability of growth in India and water management. Questions often sought clarity on persistent challenges and margin outlook, indicating slight skepticism.
• Management maintained a neutral to slightly positive tone, highlighting margin improvements, strategic acquisitions, and confidence in long-term growth. Phrases such as “we are confident” and “we think we can continue” were used, balanced with recognition of ongoing challenges in China and the wholesale channel.
• Compared to the previous quarter, analyst tone remains cautious, with similar focus areas. Management’s tone has shifted slightly more confident, especially regarding strategic actions and portfolio expansion.

Quarter-over-Quarter Comparison

• Guidance language shifted from “flat to up 1%” sales growth in 2025 (Q3 call) to a projected 2% to 5% top-line growth for 2026.
• Strategic focus has expanded with the Leonard Valve acquisition, moving deeper into water management. This marks a tangible step beyond the previous quarter’s emphasis on water treatment and portfolio assessment.
• Analysts’ focus remains on China, residential volume challenges, and competitive dynamics; however, there is increased attention on the implications of the Leonard Valve acquisition and water management strategy.
• Key metrics: EPS improved from $3.73 (2024) to $3.85 (2025); Q4 sales remained essentially flat year-over-year.
• Management’s confidence appears stronger, referencing concrete progress in restructuring, M&A, and operational improvements, while still acknowledging risk factors in China and new construction.

Risks and Concerns

• Management cited ongoing softness in China due to “continued low consumer confidence, a discontinued government subsidy program and ongoing competitive intensity.”
• The company projects “input costs, our guidance assumes that steel prices in the full year 2026 will increase approximately 10% compared to 2025,” and continued headwinds from tariffs.
• There are headwinds in wholesale residential water heaters from new construction slowdown and increased retail competition.
• Management is monitoring discretionary spend in water treatment and remains cautious about the pace of China recovery.

Final Takeaway

A. O. Smith closed 2025 with record EPS and improved margins, underpinned by growth in commercial water heater and boiler sales, and margin improvements in water treatment, even as China remained a significant headwind. The company’s 2026 guidance anticipates stable to modest growth, with a focus on broadening the portfolio through the Leonard Valve acquisition and continued investment in operational excellence. Management remains confident in its ability to drive profitable growth through strategic actions and disciplined cost control, while actively managing risks in China and the wholesale residential channel.

Read the full Earnings Call Transcript

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Shares were +1.05% Wednesday pre-market to $66.48.

Leonard Valve provides water management technologies, and the acquisition is expected to expand A. O. Smith’s presence in the water management market.

The transaction, valued at ~$412M after adjusting for estimated tax benefits, is expected to be funded through a combination of cash on hand and committed debt financing.

The purchase price represents an adjusted multiple of ~12 times forecasted 2026 EBITDA.

A. O. Smith expects the transaction to be accretive to its EPS in 2026.

The transaction is expected to close in the first quarter of 2026.

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