Buy 3M Stock for the Long-Term Stability and Reliable Dividend
3M (NYSE:MMM) stock isn’t for everyone, but if you’re 66, like I am, it’s worth your investment. As I wrote in February MMM stock is a long-term Dividend Aristocrat. It has kept a steadily rising dividend for 62 years.
Since writing that story I’ve bought a few shares for my retirement account. At my age, I’m setting the account up to deliver cash I can live on for the rest of my life.
Decades ago, when I was seeking fat capital gains, I would have avoided it. Horses for courses.
3M divides its operations into safety, transportation, consumer and healthcare baskets. Each has its own business cycle. The company tries to time acquisitions to the bottom of each unit’s cycle and to ride that cycle while it shores up others.
Sometimes this doesn’t work as planned.
A Closer Look at MMM Stock
In 2019, for instance, healthcare was under some pressure. So, 3M pounced on Acelity, a wound care specialist. They overpaid, spending $6.7 billion. This kept the stock down into 2020, even as the market for medical masks exploded.
This would have been the very best time to buy 3M, as the bad news was keeping the stock down. At one point, the yield on the shares was nearly 5%.
The stock is only now returning to pre-Acelity levels. If you’re playing the long game, though, this period has been a buying opportunity. That’s because 3M maintained its dividend. It even increased it slightly in February.
The stock’s weakness was an opportunity for income investors to grab what’s still a 3.2% yield, even with the shares up 7% since the start of 2021.
MMM Stock Post COVID
CEO Mike Roman admits he didn’t anticipate the pandemic, but 3M’s product line was prepared for it. Now, in the post-COVID world, it’s 3M’s industrial group that will lead the way.
Industrial stocks are flying as they anticipate new government funding, 3M is a primary supplier, thus MMM stock is up.
Last year growth in healthcare and safety outperformed the transportation and industrial units. This year, it will be the other way around. The balance tips, as with a ship going through choppy seas, but it’s generally maintained.
The stock is still a bargain today because of supply chain concerns. These started with the pandemic, but they’re not limited to it. As with other issues, 3M is taking a long-term view. It is protective of its ethical reputation. It wants to be seen as environmentally sensitive.
Most stories about 3M are like this. They’re about small improvements in discrete market segments, often about reinventing something for other uses. Each move looks small, taken in isolation. They just add up to slow, steady (if sometimes uneven) growth.
The Bottom Line
Results at 3M bottomed in the June quarter, as it struggled to ramp up mask supplies at the start of the pandemic. For the quarter ending March 30, the company is projecting sales and profits close to the December quarter’s $8.6 billion and $2.38 per share.
If it hits those targets on April 27, it should have earnings of about $9.60/share for the full year. The current dividend costs $5.92.
That’s really all you need to know. Speculators will run from MMM stock. Of 10 analysts following it at Tipranks, only three have it in the buy column, two want you to sell, and the price target is close to the current price.
That’s fine, because when you’re building a retirement portfolio, you’re thinking safety first, safety last, and safety always.
At the time of publication, Dana Blankenhorn directly owned shares in MMM.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack https://danafblankenhorn.substack.com/.
