There are dividend aristocrats, then there are companies in a whole other category: Dividend Dynasties. MMM is exactly one example of those companies. Always predictable, always reliable. The stuff dreams are made of. It’s also part of my 5 stock portfolio for beginners.
This year MMM extended its streak of consecutive dividend increases to 60 straight years, and its streak of consecutive years with a dividend payment to 101 years. 2018 sees 3M giving shareholders a 15.74% increase to the dividend, bringing the new quarterly amount to $1.36 from last years $1.175. This increase surpasses my projected 8.5 cent or 7.23% increase for the year. Factoring in the new dividend payment, MMM has a current dividend yield of 2.69% based on a $202.07 closing price.
A Look at the Dividend History:
I fully intend to go back as far as possible and add more to 3M’s dividend history. But for now, looking back at the 16 year time frame, 2003-2018, we see MMM has averaged a dividend growth rate of 10.18% during the time frame. The dividend hikes have taken effect for the companies Q1 dividend, so the annual payout has grown at the same 10.18%. This rate of growth equates to dividend income more than tripling to the tune of 312% over that 16 year period. That far outpaces inflation and is much higher than wage growth.
MMM vs S&P500
Thankfully there’s more to MMM than just the growing dividend. Looking at performance over the past decade, we see that MMM has almost doubled the performance of the S&P500 and that includes the recent troubles MMM has had in 2018. There’s a reason MMM is used as an example in business school of a well oiled machine, plenty of product innovation to drive future growth.
Market Cap: $120 Billion
PE Ratio: 29.93
Dividend Yield 2.69%
Payout Ratio: 72.37%
Profit Margin: 12.83%
Cash: $4.1 Billion
Debt: $15.68 Billion
Not to sound like a broken record, but the PE is a little high (like many stocks today in this market). Payout ratio allows for more years of dividend growth. Nothing really jumps out at me here.
3M isn’t the most exciting company when you look at them from the surface. But digging in and seeing that impressive streak of 60 years straight for dividend increases allows an investor to slowly but surely build a nice and steady stream of dividend income. Based on the recent drop in the price, I’d be a buyer, despite the high PE, looking for a turn around.
The Value of $10,000 Invested Long Term
On 1/2/2003 MMM opened at $126.75. $10,000 invested would purchase 78 shares rounded down. As of 7/17/2018, MMM is trading at $202.07, meaning your 78 shares would currently be worth $15,761.46. Not the most amazing growth, with a return of 59.42%.
Lets also factor in the dividend history. Since 2003, being a shareholder of 3M, your 78 shares of the stock would have paid a total of $3,394.56 in dividends (without reinvestment). This represents receiving almost 34% of your almost initial $10,000 investment back from passive dividend income. When we factor in the dividends, the total return on MMM jumps up to a more respectable 93.75%. Dividends accounted for a little over a third of the stocks total return at 36.62% of total return.
Again, this is a slow and steady stock that can produce nice income in retirement and give a modest capital gain.Follow me on the social medias: