If you’ve been following my posts at all, you probably see that I cover a lot of different topics, so it should be of absolutely no surprise to you that I am now going in depth on a Dividend KING – let’s check out this 3M dividend history!
Sometimes I talk about value investing and then other times I will talk about Momentum; sometimes I talk about dividend kings and then other time I talk about finding companies before they’re even Dividend Aristocrats! It might seem like I’m flip flopping but I am not! My goal with blogging is twofold:
- Teach you all as much about personal finance and investing as I possibly can
- Learn as much about personal finance and investing as I can so I can do more of goal #1
I know I’m not talking 3M right now, but I want you to understand that I cover so many different topics because I have a wide range of interests, and I don’t necessarily think that one strategy is better than the other. In fact, similar to a diet, I think that the best strategy is the one that you’re going to stick to!
But if that strategy is to find great dividend payers, then why not start with a list like the Dividend Kings?
Dividend Kings are essentially Dividend Aristocrats with 50 straight years of increasing dividends instead of 25. I recently highlighted Johnson & Johnson and their amazing track record so I thought that we should also take a look at what 3M has done!
They have increased their dividend for an astounding 62 consecutive years! Believe it or not, I wasn’t even able to find that much data, including on the 3M website. 3M had data that went back to 1977 so that’s where my analysis begins! I mean, even still that’s 43 years of data, so I think that’s a pretty good sample size…
Before we get too far into the data, some key numbers that I want to highlight:
- Average Dividend Growth of 8.23%/year
- Median Dividend Growth of 6.02%/year
- Minimum Dividend Growth of 1.82%/year (1999)
- Maximum Dividend Growth of 34.65%/Year (2014)
1 – the biggest dividend growth is in 2014 and even after that we have seen two years of about double the average since 1977. So, the dividend growth is picking up steam!
2 – 3M is on pace to have a 2.08% dividend growth in 2020. With so many companies cutting their dividend due to the coronavirus, this is something that I will want to follow very, very closely, especially if I am considering investing in 3M. One way to do this is to sign up for Tweet Notifications on Twitter from Dividend Cuts to see if anything is announced (this is how I get instant info on dividend cuts).
If you’re more of a visual learner like I am, take a look at how the dividend payout has grown since 1977:
You see how that dividend keeps on going up and up? You call it 3M – I call it MMM…. MMMMMMMMMM. Lol. Sorry.
Anytime that I am looking at the dividend performance of a stock, I love to go to Macrotrends because I can see a lot of other really important pieces of data that relate to the dividend. For instance, one thing that is very important to me is the dividend yield.
A lot of people will look at the dividend yield and want a higher yield but that is not my strategy at all and in fact I almost explicitly try to avoid that. Instead, I want to find companies that have a sustainable yield and aren’t getting super out of whack.
If a company’s dividend yield goes up to 8, 10, 12% or beyond, it can be a major red flag because it is very hard for a company to maintain that sort of yield.
Another thing that is super important to know is the payout ratio. A typical payout ratio for a Dividend Aristocrat is 50-80% meaning that the company is paying out 50-80% of it’s earnings in the form of a dividend.
Looking at Gurufocus we can see that the average payout for 3M over the last 13 years has been 50% and it’s currently sitting at 68%:
Personally, I am very comfortable with those numbers and I actually favor a company that’s closer to that 50% ish range because I think it gives them a lot more flexibility and likely a cash buffer when times get tough…like right now with the coronavirus.
At the end of the day, I am still a huge fan of trying to find the future Dividend Aristocrats because I think that gives us the best shot to fully capitalize both on the massive price appreciation of the stock and then also on the prestige effect of being a Dividend Aristocrat and then hopefully a Dividend King!
3M started paying a dividend in 1958, so let’s pretend that we found the stock in 1973, just 15 years after they had been paying that dividend. They weren’t a young dividend payer by any means but still had a decade prior to becoming a Dividend Aristocrat.
Holy crap! That alone is exactly why I like to try to find these companies prior to getting that name brand ‘Dividend Aristocrat’ recognition and then invest in them. Check it out:
I’m a huge fan of the Motley Fool as I have noted before, and they wrote an article about 3M being one of the Top 5 dividend kings to buy and hold forever. Now, I know that’s just an article from just one person, but it is a publication that I really do strongly trust.
I would absolutely never buy a company just off the dividend or off an article from one write (although 3M looks pretty tasty 😉) so I highly recommend you make use of the VTI to look at some of the other financials to see if 3M is a strong buy.
It is so important for you to do your own research and make sure that you have a sound reason why you’re investing in the company. I know that it can be tough to get started, so if you find yourself in that boat, let us help kick you in the right direction with a stock buying checklist and a FREE stock market 101 PDF.