3M Stock: A Dividend Aristocrat to Look Out in 2017
3M: A Dividend Aristocrat Stock
3M Co (NYSE:MMM) has rewarded its shareholders for more than 100 years. The company has improved its revenue numbers annually, as seen in the stock price appreciation. Over the past five years, 3M stock has returned 272%, with 244% of that credited to stock price hikes. The remaining 28% via dividend income.
This article will go through everything you need to know about the stock, including 3M’s 2017 dividend outlook, why 3M stock is a “dividend aristocrat,” 3M’s growth expectations, and the history of the company.
3M’s Business Overview
3M is incorporated as a technology business, but operates in the manufacturing sector. The company is divided into five reportable business units: Industrial, Health Care, Safety and Graphics, Consumer, and Electronics and Energy.
Below is a chart breaking down how much each division contributes to 3M’s revenue and operating margins. The percentage of revenue represents the total amount accounted for before any costs. Operating profits use the revenue numbers and deduct the cost of goods sold, operating expenses (employee wages, marketing, inventory insurance cost, etc.), the depreciation of assets, and the amortization cost. The expected business growth is for a period of one year.
|Business Division||Revenue (%)||Operating Profits (%)||Expected Business Growth
|Industrial||33%||31%||2% to 4%|
|Health Care||19%||18%||4% to 6%|
|Safety & Graphics||18%||23%||2% to 5%|
|Consumer||16%||14%||3% to 5%|
|Electronics & Energy||14%||14%||0% to 4%|
Below is a pie chart of how each division contributes to the overall business and will affect the bottom line. If one division has a more bullish outlook, that division receives more capital, accounting for more of the overall business as a result. But since 3M is a very large company, even a one-percent change in any division takes some time.
This chart is useful because of how it effectively breaks down the business. As a result, you can see how invested capital is well diversified among different sectors.
The Industrial segment is the largest contributor to top-line revenue and operating margins.
This division serves many different businesses, including automotive, electronics, paper and printing, food packaging, and construction. It also manufactures, repairs, and maintains components and products for cars, aircraft, and specialty vehicles, among others. The industrial sector is also known for developing and producing technical ceramics for applications in the automotive, oil and gas, industrial, and electronics sectors, as well as the defense industry.
The Health Care segment of 3M serves medical clinics, hospitals, pharmaceutical companies, dental and orthodontic practitioners, health information systems, and even food manufacturers. Products and services include medical supplies, skin health and infection prevention products, drug inhalation systems, oral care solutions, food safety products, and more. The company also provides data analytics and business intelligence to other healthcare companies. The company also produces more everyday products like medical tape and teeth whitening products, as well as more specialized goods like electrodes and stethoscopes.
Safety and Graphics
This division services the safety, security, and productivity of people, facilities, and systems. It creates products and services for both individual consumers and the commercial market.
Personal consumer products include respiratory, hearing, eye, and fall protection equipment, while the commercial side of the segment sells the likes of commercial graphics sheeting and systems, architectural design solutions, and cleaning and protection products for commercial buildings.
The Consumer segment sells products to consumer retail, office retail, office business to businesses, home improvement retailers, and drug and pharmacy retail businesses. Products produced in the division include office supply and stationery products (note pads, glue sticks), do-it-yourself home improvement items (filters, finishing materials), home care products (scrub pads, microfiber cloths), and retail personal safety goods. 3M also owns the technology found in jackets, pants, gloves, hats, and boots that keeps people warm, called 3M Thinsulate Insulate.
Electronics and Energy
The Electronics and Energy division is the smallest division in terms of revenue contribution. This division provides solutions for improving the performance of electronic devices and other electric products.
3M also provides products and components to electronic companies, including liquid crystal display (LCD) computer monitors and televisions, cell phones and tablets, notebook computers, and automotive displays. The division also produces display light control and glare reduction products and provides computer chips, cooling, and lubrication for hard drives. 3M is also in the business of touch-based products.
Why is 3M Stock a Dividend Aristocrat?
3M stock has increased its dividend for the past 59 consecutive years, hence its appearance on the S&P 500 Dividend Aristocrat Index; a company must have increased its dividend for 25 consecutive years to be included. It is also present on the index because it meets the other criteria of being a Fortune 500 company with at least 250,000 shares being traded on a daily basis, the latter providing liquidity to investors of 3M stock.
3M`s Stock Dividend Increase History
3M has been paying a dividend for a century without missing a single payment. Reviews and increases occur annually in February.
The dividend was $1.06 per share 20 years ago, but now amounts to $4.70, or growth of 560%. Over just the last five years, the dividend has seen an increase of 196%, with annual increases in the range of 5.9% to 34.6%. Below is a table with the details of the dividend payment over the past five years.
||Declaration Date||Record Date||Payment Date|
|May 17, 2017||$1.18||2.4%||N/A||May 09, 2017||May 19, 2017||June 12, 2017|
|February 15, 2017||$1.18||2.6%||5.9%||February 07, 2017||February 17, 2017||March 12, 2017|
|November 16, 2016||$1.11||2.6%||N/A||November 08, 2016||November 18, 2016||December 12, 2016|
|August 17, 2016||$1.11||2.5%||N/A||August 10, 2016||August 19, 2016||September 12, 2016|
|May 18, 2016||$1.11||2.7%||N/A||May 10, 2016||May 20, 2016||June 12, 2016|
|February 10, 2016||$1.11||2.9%||7.8%||February 02, 2016||February 12, 2016||March 12, 2016|
|November 18, 2016||$1.03||2.6%||N/A||November 10, 2016||November 20, 2016||December 12, 2016|
|August 19, 2016||$1.03||2.8%||N/A||August 10, 2016||August 21, 2016||September 12, 2016|
|May 20, 2016||$1.03||2.5%||N/A||May 12, 2016||May 22, 2016||June 12, 2016|
|February 11, 2016||$1.03||2.5%||19.9%||December 16, 2014||February 13, 2016||March 12, 2016|
|November 19, 2014||$0.86||2.2%||N/A||November 11, 2014||November 21, 2014||December 12, 2014|
|August 20, 2014||$0.86||2.4%||N/A||August 12, 2014||August 22, 2014||September 12, 2014|
|May 21, 2014||$0.86||2.4%||N/A||May 13, 2014||May 23, 2014||June 12, 2014|
|February 12, 2014||$0.86||2.6%||34.6%||December 17, 2013||February 14, 2014||March 12, 2014|
|November 20, 2013||$0.64||2%||N/A||November 12, 2013||November 22, 2013||December 12, 2013|
|August 21, 2013||$0.64||2.2%||N/A||August 13, 2013||August 23, 2013||September 12, 2013|
|May 22, 2013||$0.64||2.3%||N/A||May 14, 2013||May 24, 2013||June 12, 2013|
|February 13, 2013||$0.64||2.5%||7.6%||February 05, 2013||February 15, 2013||March 12, 2013|
|November 20, 2012||$0.59||2.7%||N/A||November 12, 2012||November 23, 2012||December 12, 2012|
|August 22, 2012||$0.59||2.5%||N/A||August 15, 2012||August 24, 2012||September 12, 2012|
Will 3M Offer a Higher Dividend in 2017?
In February of 2017, 3M’s dividend increased from $1.11 per share to $1.175 per share, or 5.9%. With that in mind, I believe, based on the company’s history of dividend increases, that the dividend will remain at $1.175 per share for the rest of 2017. That said, this is just my own beliefs, and further dividend hikes this year are always possible.
Will a Stock Split Occur in 2017 for 3M Stock?
In its history of being a public company, 3M stock has seen a total of 10 stock splits, with the 11th potentially occurring this year. The last split was in 2003, when the trading price was near $140.00, and the one prior to that in 1994 was at roughly $102.00 a share. Both of these past splits resulted in the share price being divided into two and the shareholders now owning twice as many shares.
Now, with a stock split, there is no market value change. Rather, splits are done more for the interest of smaller retail investors and to make the shares more affordable for investors.
A 2017 split is possible because the stock price range has gone from $163.00 to a high of $210.00–higher than previous stock split prices. It could be a two-for-one stock split, which simply doubles the number of shares owned and reduces the trading price in half, or a three-for-one stock split, which triples the number of shares and reduces the trading price to a third of what it was. The stock split announcement could come in the second half of 2017.
Below is a table detailing 3M’s stock split history.
|Year of Split||Date of Split||Ratio|
|2003||September 29, 2003||2-for-1|
|1994||March 15, 1994||2-for-1|
|1987||May 22, 1987||2-for-1|
|1972||May 23, 1972||2-for-1|
|1960||May 15, 1960||3-for-1|
|1956||May 18, 1956||2-for-1|
|1951||January 08, 1951||4-for-1|
|1945||November 13, 1945||2-for-1|
|1922||December 16, 1922||2-for-1|
|1920||December 24, 1920||2-for-1|
Can 3M Maintain its Dividend?
As the saying goes, actions speak louder than words, and this holds true for 3M’s dividend. Aside from the previously mentioned 59 straight increases and the company having never missed a payment, 3M’s financials support a higher dividend payment, according to the company’s payout ratio, which has been between 34% to 54% over the past decade. The current ratio is within this historic average, at 52%.
Looking towards the rest of 2017 and beyond, the payout ratio could remain within its 10-year range, based on expected earnings growth. Below is a table regarding the outlook over the next four years. of earnings.
The earnings trend is expected to increase, which could be evidence that the dividend will remain steady going forward.
3M’s Growth Prospects
3M owns more than 100,000 patents, created in-house using internal resources. On average, 3M is issued 3,000 patents per year, with 500 coming from the U.S. alone. The company invests approximately six percent of its annual sales in research and development (R&D). (Source: “3M Celebrates Innovation Milestone: Receives 100,000th Patent,” 3M Co, May 7, 2014.)
Employees are encouraged to use the available resources to create new products for one of the company’s five business segments. 3M is known to both grow its business around a patent with the intent to own it forever, or look to eventually sell it. Sometimes, it may even create a larger business unit for a strong enough product. All patents are given consideration when deploying capital.
3M recently sold off its transportation safety division, instead moving to invest in more rapidly changing trends in transportation safety and mobility. The transaction also saves money on employee wages due to the number of related division layoffs. The transaction is expected to give a $0.15-per-share boost to earnings for 2017. (Source: “3M to Sell Its Electronic Monitoring Business; Transportation Safety Division to Focus on Connected Roadways of the Future,.”3M Co, June 1, 2017.)
As part of further efforts to improve, 3M recently acquired Scott Safety from Johnson Controls. The purchase will add to self-contained breathing apparatus (SCBA) systems, gas and flame detection instruments, and other items that will complement 3M’s current portfolio of safety products. The purchase fits right into 3M’s plan of investing more in personal safety products, which is a growth area for the company. This transaction will negatively affect earnings by $0.10 per share until Scott Safety is integrated into the company. Once it is, however, margins should improve because of costs decreasing. (Source: “3M to Acquire Scott Safety from Johnson Controls,.”3M Co, March 16, 2017.)
Another recent acquisition is of medical coding company Semfinder. This purchase will broaden 3M’s healthcare portfolio on both a worldwide and technological basis, as well as accelerate the company’s goal of moving medical records from paper to digital. There should be growing demand for this business unit from medical providers of the cost savings, boosting earnings. (Source: “3M Acquires Semfinder,.”3M Co, September 6, 2016.)