Some blue chips never adapted to the post-industrial era and lost their sheen as investments, while others have shown an admirable ability at reinvention.
One such success story is 3M Co (MMM), which develops and markets products with iconic names that are familiar parts of our everyday lives: Scotch tape, Post-It Notes, Scotchgard and others. Among its host of products are industrial coatings, ceramics, sealants and abrasives.
MMM makes essential products without which modern industry couldn’t function. As such, it’s a cyclical play on the global recovery. But the company’s embrace of continual innovation also makes 3M stock a good bet over the long haul.
The company was a reliable earnings and dividend generator throughout most of the 20th century and is adroitly adapting to the 21st. 3M stock is a steady “defensive growth” play amid a market that’s increasingly volatile and noted for huge one-day swings.
Based in St. Paul, Minnesota and once known as the Minnesota, Mining and Manufacturing Company, 3M’s reach is vast, encompassing the sectors of consumer goods, health care, protection services, and communications. The company boasts impeccable blue chip credentials and is a component of the Dow Jones Industrial Average and the S&P 500.
3M hasn’t become an industrial dinosaur; it has reformulated and redesigned its products as the economy, consumer expectations and government regulations change. Notably, MMM altered the formula of its bestselling household product Scotchgard to eliminate polluting chemicals. Even the Post-It Note was redesigned and combined with a smartphone app to retain the product’s appeal in a digital world.
3M RFID — Barcodes on Steroids
3M has also forged into new technology opportunities. 3M is increasingly involved in the burgeoning security market, including radio frequency identification (RFID), high-tech toll booths and license plate recognition.
MMM has made an especially big push into RFID, one of the hottest innovations in technology today. RFID tags increasingly pervade all aspects of life, including supply chain inventory, retailing, policing and health care, to name just a few. RFID technology automatically identifies a “tagged” object by remotely retrieving and storing information from small transponders, or tags.
Each miniaturized tag includes an embedded antenna that allows for the transmission and reception of radio waves from an RFID transceiver. The use of RFID makes organizations more efficient and cost-effective, by giving managers the power to locate any item, pallet or person with pinpoint accuracy.
Part of 3M’s post-industrial “reinvention” has been to become a leader in RFID.
3M Stock — Growth and Income
3M reported third quarter 2014 earnings per share (EPS) of $1.98, an increase of 11.2% compared to the same quarter a year ago. Revenue increased 2.8% year-over-year to $8.1 billion.
And if investors weren’t impressed enough with that, the company paid $550 million in cash dividends to shareholders and repurchased $1.2 billion worth of its own stock in the quarter.
In December, 3M management issued guidance that 2015 earnings would be between $8 and $8.30 per share of 3M stock, within range of Wall Street’s estimates and representing a year-over-year growth rate of 12%. The company also announced that it would raise its dividend by 20% in the first quarter of 2015.
With a healthy dividend of 4.1% and double-digit earnings growth expected for 2015, 3M stock is a safe haven for investors who seek both growth and income in a market that’s increasingly resembling a roller coaster.
As of this writing, John Persinos did not hold a position in any of the aforementioned securities.
