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Buy Watsco (WSO) @ $57

|Includes:Watsco, Inc. (WSO)

 Have you ever wondered who made the repair parts for your air conditioner or other heating system? Chances are it is Watsco (NYSE:WSO). Founded in 1945, this company exports parts to Latin America and the Caribbean and supplies 36 states and Puerto Rico. With the economy about to take a down turn, this is a short term play for growth and a longer term play for dividend growth investment.

 

From the growth standpoint, the earnings per share are projected to grow from $2.86 in 2011 to 3.36 in 2012 and $4.00 in 2013. This will provide a 17.48% earnings per share growth rate next year and 19% the year after that. There is only 38.2% debt to total assets and a 3.8% dividend yield. This Dividend Contender has 10 years on increasing dividends and a 5-yr dividend growth rate of 26.9% and 35.2% for the 10 year dividend growth rate. The current p/e of 22.4 is more than justified by the combination of the 5-yr dividend growth rate and the nearly 4% yield.

 

The stock is a cyclical stock and when the business cycle ends, it drops. The 5-yr earnings per share growth rate is -9%.

 

WSCO earnings per share

Year

$2.86

2011

$3.36

2012

$4.00

2013

Stocks: WSO