105 degrees.

That’s the heat index forecast next week here in central Arkansas. In fact, large parts of the country look to be broiling under sweltering temperatures and stifling humidity.

When the mercury soars, there’s no better time to have a backyard oasis.

Unfortunately, weather conditions aren’t the only (or even the biggest) factor for those who are contemplating a swimming pool. These projects are typically financed, so interest rates and borrowing costs play a large role.

Right now, they are proving to be a hindrance.

A cooldown in many regional housing markets is also giving some homeowners second thoughts about making these long-term financial commitments. Fluctuations in net worth can impact the decision to splurge on big-ticket items.

Whatever the reason, fewer pools are being dug right now. Homeowners installed about 60,000 new in-ground pools last year, a steep drop-off from 70,000 the year before.

That’s not exactly great news for Pool Corp. (NSDQ: POOL), the nation’s largest wholesale pool distributor. Through a vast global network of service centers, the company feeds more than 100,000 customers with 200,000 different outdoor products.

That includes everything from pool essentials (like chlorine and pump filters) to landscaping products and outdoor patio furniture. All told, the business rakes in approximately $5 billion in annual sales.

Unlike the weather, though, the macro climate has been a bit chilly of late. Sales dipped about 4% last quarter, which coupled with slimmer operating margins, drove earnings down about 30%. Management is targeting profits of $11.35 per share this fiscal year, a steep decline from the $13.35 it pocketed a couple years ago.

While stable, demand is still well below the pandemic-aided levels of 2020 and 2021 when building crews couldn’t work fast enough. Fortunately, new construction only accounts for a 15% sliver of Pool’s revenues.

Renovations and remodeling account for 20%, while the bulk of sales (about two-thirds) are tied to maintenance and repairs.

As any pool owner can tell you, digging a new pool may be a discretionary purchase, but maintaining an old one isn’t — unless you want a murky, algae-filled bog in your backyard.

The class of 2025 may be smaller than 2024 or 2023, but every new unit adds to the overall installed base.

According to the Pool and Hot Tub Alliance, there are now 10.7 million residential and public pools in the United States — one for every 30 people nationwide. And just about all of them require filters, vacuums, chemicals, and other consumable products to stay sparkling clear.

Through its network of sales centers, Pool Corp. supplies specialty retail stores, professional maintenance shops, service contractors, and other such customers.

And since these buyers have their own clients who prefer clean pools, most product lines see recurring orders.

So even when the backhoes aren’t quite as busy, Pool still generates healthy cash flows. And with a clean balance sheet (and relatively light capital expenditures), it has the luxury of returning heaps of cash to stockholders.

By heaps, I mean $102 million last quarter alone. Keep in mind, this mid-cap business only has a market cap of $11 billion. And there’s more on the way.

A few weeks ago, management doubled its share repurchase program from $300 million to $600 million — while upping the quarterly dividend from $1.20 to $1.25 per share.

Pool Corp. has now raised dividends 20 times in the past 21 years. Payouts have risen by 115% since 2020 alone.

Don’t be deterred by the soft year-over-year comparisons. This isn’t a business in disarray, simply one returning to normal. One that remains highly profitable, even in downcycles. But negativity has temporarily driven shares of this entrenched industry leader to a 52-week low — creating an opportune window for new investors.

Research groups are projecting stable 4% to 5% annual growth in this market over the next few years as more homeowners spruce up their outdoor living spaces – to say nothing of new apartment and hotel swimming amenities and other commercial projects.

This long-term tailwind has helped POOL stock deliver a splashy 29% annualized return since its IPO in 1995.

But don’t take my word for it. While Berkshire Hathaway hasn’t been in a buying mood lately, it made a notable exception for Pool – doubling its stake, according to the latest 13-F filing.

Sounds like Warren Buffett is saying come on in, the water is fine.