The Dividend Kings are a group of 46 stocks that have each raised their dividends for at least 50 consecutive years, explains Bob Ciura, editor of Sure Dividend; here, he concludes a review of his favorite investments among the Kings.

At Sure Dividend, we recommend investors in retirement take a closer look at high-quality dividend stocks. To narrow it down, we specifically favor stocks with long histories of increasing their dividends every year, such as the Dividend Kings.

Read The Top Dividend Kings, Part 1 — Tennant Company here…

Read The Top Dividend Kings, Part 2 — Leggett & Platt here…

Read The Top Dividend Kings, Part 3 — Lowe's Companies here…

Read The Top Dividend Kings, Part 4 — Stanley Black & Decker here…

3M (MMM) is a Dividend King that has increased its dividend for over 50 years in a row. The stock has a long history of growth, a positive outlook ahead, and a high level of expected returns. These qualities make 3M a top Dividend King today.

Business Overview & Recent Events

3M is a global industrial manufacturer that sells more than 60,000 products that are used every day in homes, hospitals, office buildings and schools around the world. 3M operates four segments.

The Safety & Industrial division produces tapes, abrasives, adhesives and supply chain management software as well as manufactures personal protective gear and security products. The Healthcare segment supplies medical and surgical products as well as drug delivery systems. However, 3M has announced it intends to spin off its healthcare segment.

The Transportation & Electronics division produces fibers and circuits with a goal of using renewable energy sources while reducing costs. The Consumer division sells office supplies, home improvement products, protective materials and stationary supplies.

3M has not been immune to rising inflation, but the company recently announced better-than-expected earnings. On October 25th, 2022, 3M reported third quarter earnings results. Revenue of $8.6 billion declined 3.8% year-over-year, and missed estimates by $100 million. Organic sales grew 2% from the same quarter last year. Adjusted earnings-per-share of $2.69 beat expectations by $0.10 per share, and increased 4% year-over-year.

For the full year, the company expects sales to decline 3% to 3.5%, as the dollar strength weighs on foreign exchange translation. But organic sales are expected to grow by 1.5% to 2%. The company lowered full-year earnings guidance, now expecting adjusted EPS in a range of $10.10 to $10.35 vs. $10.30 to $10.80 prior.

Valuation & Expected Returns

3M has increased its dividend for 64 consecutive years, giving it one of the longest streaks of dividend hikes in the entire stock market. It has maintained such an impressive track record through its durable competitive advantages, primarily its innovation. The company targets R&D spending equivalent to 6% of sales (~$2 billion annually) in order to create new products to meet consumer demand.

We believe 3M’s innovation will generate 5% annual earnings-per-share growth. In addition, the stock is undervalued, with a P/E of 11.6 against our fair value estimate of 19, which is the 10-year average valuation multiple for 3M stock.

Expansion of the P/E multiple from 11.6 to 19 could boost annual returns by 10.4% over the next five years. Lastly, shares currently yield 5.0%, leading to total expected returns of 20.4% per year for 3M. As a result, 3M is our top-ranked Dividend King for future expected returns.

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