A long-standing Dow and dividend darling, 3M (NYSE:MMM) stock is known far and wide as a buy-and-hold that won’t enrich you in a day but could provide strong returns over the years.
In the aftermath of an earnings report that some folks considered a letdown, however, 3M shares are trading far below their peak price of $250+ attained back in January of 2018.
In an expensive large-cap stock market, then, some would say that MMM stock is lagging, while others would view it as a prime opportunity to stake a claim in an industrial giant.
So, who’s right here? After the apparent earnings letdown, is it a good time to scoop up shares of this depressed dividend king?
The Numbers Came Up Short — or Did They?
On the 28th of January, 3M released its earnings report for 2019’s fourth quarter. As reported by InvestorPlace‘s Tyler Craig, the company reported additional job cuts and displeased the analyst community with adjusted earnings per share of $1.95 versus the consensus estimate of $2.10.
All told, earnings missed estimates by 7.1% while sales missed by 0.2%, meaning that the quarterly net sales result of $8.11 billion was nearly in line with what was expected.
That $8.11 billion in net sales, however, is 2.1% greater than the net sales of the same quarter from the previous year. Looking at the big picture, then, it could be argued that the numbers weren’t so terrible after all, with the adjusted EPS being the only poor mark on an otherwise acceptable report card.
Still, investors are notorious for obsessing over one number and punishing a perfectly good stock over an imperfection. Tyler Craig correctly observed that MMM stock “has spent the last two years stuck in bear country,” and I suspect that the investing community have put far too much weight and pressure on 3M’s quarterly earnings announcements in hopes of a miracle to turn the share price around.
Still a Darling (to Me, at Least)
I called 3M stock a “dividend darling” earlier, and whenever the share price sags I tell buy-and-holders to lift their spirits by checking the company’s dividend history. 3M has been consistently shareholder-friendly for longer than most people have been on this earth. The company has raised its dividend payouts for 62 years running.
February’s announcement of a 2% dividend hike marked the 62nd year, and today 3M’s forward annual dividend yield stands at a very healthy 3.7%. This is a company that has rewarded its shareholders with “divvies” for more than a century without interruption, making the stock an ideal “set-it-and-forget-it” type of investment.
Moreover, 3M shares could get a boost from an unexpected and unfortunate event: the coronavirus from China, cases of which have been confirmed in more than 10 countries. Even amid the spread of the virus, 3M’s manufacturing facility in China remains operational. In fact, the company is currently accelerating production of “respiratory protection products” like face masks.
Indeed, CEO Mike Roman made it crystal clear that 3M is prepared to provide potentially lifesaving face masks in response to the global demand for protection from the viral outbreak:
Now coronavirus, it’s kind of changing things as we go and we’re seeing what you’re seeing. We’re seeing increased demand for our respiratory protection products, and we’re ramping up our production worldwide, in China, around the world to meet that demand.
Roman also reportedly asserted, “We are ramping to full production. We’re going 24/7,” and I’m confident that 3M’s commitment to helping stem the spread of the virus will benefit both the population and, hopefully, the company’s shareholders in due time.
The Takeaway on MMM Stock
I don’t mind if MMM stock has been in bear country for a while, as I consider myself an expert bear poacher (at least in the investing domain, if not in real life). 3M might not be out of the woods yet, I’ll grant, but value-focused bargain hunters shouldn’t let this premium dividend deliverer get away.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
