Fast growing emerging markets such as China and India hold the promise of untold riches if you invest in the right companies. However, due to greater risks involved in dealing with their much more opaque regulatory environments and mind bending amounts of bureaucratic red tape it’s hard for US investors to know where to begin. While country specific ETFs are one option, the trouble is that these often stick your money into large, bloated, and sometimes dangerously leveraged state owned enterprises and banks. These are slow growing and potentially dangerous companies to own during the next global recession.

Fortunately, US multinationals are another great way to profit from strong economic growth in emerging markets. One little known blue chip in particular, A.O Smith (AOS), is my absolute favorite way to invest in the booming Chinese and Indian economies. In fact, there are four reasons why I consider this dividend aristocrat (with 25 straight years of dividend growth to its name) to be a must own China/India play.

A Fast Growing Dividend Aristocrat That You Can Trust

Founded in 1874, A.O Smith manufactures residential and commercial gas and electric water heaters, boilers, and water treatment products that are sold in over 60 countries around the world. This is one of those classic industrial names that proves that boring is indeed beautiful. That’s because A.O Smith has spent 144 years building up a strong portfolio of businesses in its home US market and in developed countries. In fact in the US, (43% of sales in 2017), it owns 55% and 45% of wholesale and retail market share, respectively. That’s thanks to its industry leading distributor network (1,300 in North America alone), strong focus on product innovation, (3% of sales on R&D), and strong brand loyalty from its industrial and retail customers.

Source: Ycharts

As a result of its strong moat, the company manages to generate strong profitability and dividend growth, which results in market crushing returns. In fact over the past 30 years A.O Smith has generated 14,130% total returns (18% annual return) compared to the S&P 500’s 1,940% (10.6% annual return).

That’s courtesy of some truly impressive growth for an industrial company including since 2010:  

• Sales growth: 10.5% annually
• Adjusted EBITDA growth: 21% annually
• Adjusted EPS growth: 26% annually
• Free cash flow growth: 22% annually
• Dividend growth: 24% annually

While A.O Smith likely can’t keep up such stunning growth going forward it still has two strong growth catalysts that should cause it to continue generate double digit dividend growth and market beating returns for many decades to come.