The Dividend Aristocrats are a select group of 66 stocks in the S&P 500 Index that have each raised their dividends for at least 25 consecutive years. In this five-part series, Ben Reynolds — editor of Sure Dividend — highlights his five favorites.
The next installment in our top 5 Dividend Aristocrats is 3M Company (MMM), one of the most legendary Dividend Aristocrats due to its extremely long history of rising dividends. 3M has increased its dividend for 64 consecutive years
Read Dividend Aristocrats Part 1 here…
Read Dividend Aristocrats Part 2 here…
Read Dividend Aristocrats Part 3 here…
According to the company, 3M has returned over $14 billion to shareholders through dividends and share repurchase over the last three years. The stock currently yields 4%. And, the stock appears undervalued right now, after a steep drop in share price year-to-date. As a result, we believe 3M is one of the top Dividend Aristocrats to buy now
A Diversified Industrial Conglomerate
3M is a true conglomerate, with huge businesses across multiple segments. 3M sells more than 60,000 products that are used every day in homes, hospitals, office buildings and schools around the world. 3M is now composed of four separate divisions
The Safety & Industrial division produces tapes, abrasives, adhesives, personal protective gear, and more. The Healthcare segment supplies medical and surgical products as well as drug delivery systems. Its Transportation & Electronics division produces fibers and circuits with a goal of using renewable energy sources. Lastly, the Consumer division sells office supplies, home improvement products, protective materials and stationary supplies
The current environment remains challenged for 3M. Fourth-quarter revenue grew by only 0.3% year-over-year. Earnings-per-share of $2.31 was down slightly from the prior year. The Consumer segment was the best-performer for 3M, with 5% segment revenue growth for the quarter. Separately, Health Care was a growth segment with a 1.6% revenue increase
Still, 2021 was a strong year overall for 3M. For 2021, revenue grew 10% to $35.4 billion while earnings-per-share of $10.12 rose 8% from the prior year. Organic growth for the quarter and full year was 1.3% and 8.8%, respectively
3M has grown its earnings-per-share by 5.4% per year over the last decade. We expect 5% annual EPS growth over the next five years. This growth should easily allow the company to continue raising its dividend
3M’s Dividend Track Record Is Nearly Unrivaled
3M has increased its dividend for 64 years in a row. There are only a handful of companies that have raised their dividends for as long as 3M. It has maintained its impressive track record with financial discipline, a successful long-term growth plan, and a shareholder-friendly management that is committed to raising the payout
Sometimes its dividend increases are more muted, such as the recent 1% increase approved for 2022. However, this keeps the dividend growing while also providing shareholders with a competitive 4% yield
In addition, expected EPS growth will boost shareholder returns. And, the stock appears undervalued right now. 3M stock has declined 15% year-to-date. This has lowered the stock valuation, presenting a better buying opportunity. Shares trade for a 2022 P/E ratio of 14.7
Our target price-to-earnings ratio is 19 as this is in-line with the stock’s average multiple since 2012. Overall, 3M stock is expected to generate total returns of 13.3% per year over the next five years
