3M (MMM) Stock Analysis
The 3M dividend has been paid continuously since 1916 and increased for 58 consecutive years; qualifying the company as a
Dividend King, Dividend Aristocrat, and Dividend Champion.
Current Dividend: $4.70
Dividend Yield: 2.3%
Cash Dividend Payout Ratio: 54%
Market Capitalization: 120 B
Enterprise Value: 129 B
Industry: Diversified Industrials
3M (MMM) is a diversified industrial conglomerate which manufactures over 55,000 products available for sale in over 200 countries. The company calls itself a “technology company with a global presence in the following businesses”: Industrial (tapes, adhesives, specialty materials, etc.; Safety and Graphics (personal protection products); Health Care (medical and surgical supplies); Electronics and Energy (solutions for electronic display, touch screens, computer screen filters, etc.); and Consumer (office and home products).
Strategic advantages include a strong brand, patents, technology, and being a low cost producer. Approximately 50% of 3M products are consumables, providing a less cyclical revenue stream to balance their portfolio.
3 M is known for innovation over decades due to their successful research and development. The company is well diversified in product offerings and geography, and has a long term record of growth. They have the infrastructure and proven ability to bring new products to market.
Many 3M products have a low barrier to entry meaning the company has to be careful about pricing its products. With so many patents the company has to spend heavily on litigation.
3M is expanding rapidly in emerging markets. The company is good at making small acquisitions that propel growth. Global fluctuations in input prices are trending in the company’s favor.
Product life cycles require the company to constantly innovate. Without innovation the company would not be able to make growth projections. A softening of global economies and rising U.S. dollar could hurt earnings.
Dividend Analyzer Checklist
(updated January 2017)
Dividend Safety Score (17/33 points)
Dividend Per Share (ttm): $4.36
Dividend Payout Ratio (ttm): 54%
Dividend Per Share (10 Year Growth): 9.3%
Cash From Operations (CFO) Per Share (ttm): $10.93
CFO Dividend Coverage (CFO / DPS): 2.5 (2/6 points)
Free Cash Flow (FCF) Per Share (ttm): $8.63
FCF Dividend Coverage (FCF / DPS): 2.0 (4/6 points)
Net Financial Debt: $9695 M
Total Assets: $34051 M
Net Financial Debt / Total Assets: 28% (5/12 points)
Net Financial Debt to EBITDA (ttm): 134%
Total Liabilities to Assets Ratio (Qtr.): 65%
Piotroski Score (1-9) (TTM): (6/9 points)
Profitability & Growth Score (21/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: 3.6% (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 6.5% (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 4.3% (6/6 points)
Operating Earnings Yield (ttm): 6.3% (2/7 points)
Net Income (ttm): $4933 M
Gross Profit (ttm): $14927 M
Total Assets: $34051 M
Gross Profitability Ratio = GP / Total Assets: 44% (9/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 23%
Return on Invested Capital (ROIC): 21%
Return on Invested Capital (ROIC) (5 Year Median): 20%
Return on Invested Capital (ROIC) (10 Year Median): 20%
Valuation Score (16/34 points)
Free Cash Flow Yield (ttm): 4.8% (5/9 points)
EV to EBIT (ttm): 16.6 (4/9 points)
EV to EBITDA (ttm): 13.7 (4/9 points)
PE10: 27.2 (3/7 points)
Price to Sales Ratio (ttm): 3.6
Price to Book Value (ttm): 8.7
Price to Earnings Ratio (P/E) (ttm): 21.7
TOTAL POINTS – (54/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
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(updated January 2017)
3M is ranked #93 (out of 246) and #28 (out of 56) in the Industrial Sector by the Dividend Analyzer.
MMM is an average investment at this time. Because of its long consistent history it can be considered for large diversified dividend portfolios. Otherwise, I would wait for a better entry point.
Type of Investor / Recommendation
Large Diversified Dividend Portfolios / Can Be Considered
Looking For Exposure to Industrial Sector / Average Option
Deep Value Investors / Avoid
Portfolio Position Disclosures:
DVB Foundation Portfolio: None
DVB Dividend Growth: None
DVB High Income: None
Arbor Asset Allocation Model Portfolio (AAAMP): None
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