3M Co's Dividend Analysis
Assessing the Upcoming Dividend and Historical Performance of 3M Co
3M Co (NYSE:MMM) recently announced a dividend of $1.51 per share, payable on 2024-03-12, with the ex-dividend date set for 2024-02-15. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into 3M Co's dividend performance and assess its sustainability.
What Does 3M Co Do?
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3M is a multinational conglomerate that has operated since 1902, when it was known as Minnesota Mining and Manufacturing. The company is well known for its research and development laboratory and it leverages its science and technology across multiple product categories. As of 2020, 3M is organized into four business segments: safety and industrial, transportation and electronics, healthcare, and consumer. Nearly 50% of the company's revenue comes from outside the Americas, with the safety and industrial segment constituting a plurality of net sales. Many of the company's 60,000-plus products touch and concern a variety of consumers and end markets.
A Glimpse at 3M Co's Dividend History
3M Co has maintained a consistent dividend payment record since 1959. Dividends are currently distributed on a quarterly basis.
3M Co has increased its dividend each year since 1959. The stock is thus listed as a dividend king, an honor that is given to companies that have increased their dividend each year for at least the past 65 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down 3M Co's Dividend Yield and Growth
As of today, 3M Co currently has a 12-month trailing dividend yield of 6.48% and a 12-month forward dividend yield of 6.52%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, 3M Co's annual dividend growth rate was 0.70%. Extended to a five-year horizon, this rate increased to 1.70% per year. And over the past decade, 3M Co's annual dividends per share growth rate stands at 7.90%.
Based on 3M Co's dividend yield and five-year growth rate, the 5-year yield on cost of 3M Co stock as of today is approximately 7.05%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, 3M Co's dividend payout ratio is 0.65.
3M Co's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks 3M Co's profitability 7 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported net profit in 9 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. 3M Co's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and 3M Co's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. 3M Co's revenue has increased by approximately 2.20% per year on average, a rate that underperforms than approximately 60.3% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, 3M Co's earnings increased by approximately -0.20% per year on average, a rate that underperforms than approximately 71.62% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 0.40%, which underperforms than approximately 73.39% of global competitors.
Next Steps
In conclusion, while 3M Co's long-standing history as a dividend king and its current yield figures are attractive, the company's modest growth rates and underperformance relative to global competitors raise questions about the long-term sustainability of its dividend growth. The payout ratio and profitability rank indicate a strong foundation, but investors should consider the mixed signals from the company's growth metrics when evaluating 3M Co as a potential investment for dividend income. It is essential to monitor how 3M Co navigates the challenges ahead to maintain its reputation as a reliable dividend payer. Will 3M Co continue to be a staple in dividend investors' portfolios, or will the need for growth reinvestment take precedence over dividend increases? Only time will tell.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
