3M Investors: Look For A Dividend Increase Soon

3M (MMM) is one of the rare dividend stocks you can set your watch to. The company delivers a dividend increase each year, in February, like clockwork.

Last year’s increase was a doozy—the company raised its dividend by 8% and also announced a $10 billion share repurchase.

3M has raised its dividend for 58 years in a row. It is a Dividend Aristocrat, which are an elite group of companies in the S&P 500 that have raised their dividends for 25+ consecutive years.

You can see the entire list of Dividend Aristocrats here.

3M has maintained such a long history of dividend increases and share buybacks because the company has a strong brand, a highly profitable business model, and generates billions of cash flow each year.

This article will discuss why 3M is a virtual lock to raise its dividend in a matter of weeks.

Business Overview

3M is a diversified industrial giant. Most investors probably know the company from its popular consumer products brands, including Post-It-Notes and Scotch tape.

But 3M has a huge product portfolio. The company services virtually every industry. It operates five segments, each of which generates more than $4 billion in annual revenue:

  • Industrial (33% of revenue)
  • Safety & Graphics (19% of revenue)
  • Healthcare (17% of revenue)
  • Electronics & Energy (16% of revenue)
  • Consumer (15% of revenue)
  • All of these businesses are large, and all are highly profitable. Each segment generates an operating margin of 21% or higher.

    It achieves such high margins because of its competitive advantages. 3M has a robust portfolio that is filled with strong brands, thanks to its industry-leading research and development.

    MMM R&D

    Source: 2017 Outlook Meeting presentation, page 17

    3M’s R&D is second to none in the industrial sector. Its R&D spending reached nearly $2 billion in 2015.

    Among its operating segments, safety and graphics, health care, and consumer product sales are growing nicely for the company. 3M’s safety and graphics business posted a 9.5% revenue increase over the first nine months of 2016.

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    Author: Travis Esquivel

    Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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