The diversified industrial conglomerate, 3M (
), has a robust dividend policy which is highlighted from its
long-term dividend track record and high payout ratio. The company
has paid dividends to its shareholders consecutively for the last
97 years. More importantly, it has increased dividends successively
for the last 56 years. In 2013, the company anticipates to pay
dividends of $2.54 per share to its shareholders, up from $2.36 per
share it paid last year. At Friday's (September 13) closing
price of $118.60, this translates to a yield of 2.14%.
Additionally, on average 3M has paid out 40% of its earnings as
dividends to its shareholders. Such a high payout ratio coupled
with the long history of dividend payments makes 3M a highly
attractive stock for investors looking to invest in dividend-paying
stocks. The track-record clearly highlights the company's
commitment to dividends.
Looking ahead, 3M says that it will raise its future dividends
in line with its earnings growth. At the same time, it targets an
earnings growth of 9%-11% per year for the next five years. We
figure that the company can achieve this earnings growth on the
strength of its diversified business interests that
span industrial, health care, consumer, safety, graphics and
electronic markets driven by its strong and growing commitment to
research. Thus, it is highly likely that 3M's shareholders
will see good dividend increases in the near-term.
We currently have
a stock price estimate of $115 for 3M
, marginally below its current market price.
See our complete analysis of 3M here
Greater Commitment To Stock Repurchases
In addition to dividends, 3M has an active share repurchase
program. During 2003-07, the company repurchased shares worth $10
billion and during 2008-12, it repurchased shares worth $7 billion.
For the next five years, 2013-17, the company anticipates it will
raise its stock repurchases to between $7.5 billion and $15
billion. At a market cap of around $81 billion at Friday's
(September 13) closing price, stock repurchases reach a significant
proportion of the company's market cap. Together, through these two
channels - dividends and stock repurchases - 3M is returning
significant cash to its shareholders.
How a Company's Products Impact its Stock Price at