History Favors Investors Who Believe in 3M

Industrial giant 3M (NYSE:MMM) has been drawing a lot of attention over the past few weeks. The St. Paul-based company has found itself in the center of the coronavirus relief efforts. MMM stock has climbed about 10% in the past five days as the Trump administration announced plans to buy approximately 167 million masks from the company.

History Favors Investors Who Believe in 3M

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The order will hopefully put an end to the dispute the company was having with the administration. President Trump was critical of the company’s efforts to supply masks during the pandemic.

Was This Noise or a Sign of Things to Come?

Was the spat over masks just a tempest in a teapot or a distraction from more fundamental problems? MMM stock gets a split decision from recent InvestorPlace writers.

Chris Lau argues the latter by pointing out that future revenue models suggest it may be time to sell MMM stock. Ian Cooper doesn’t give the stock a rousing endorsement but does suggest that fear may have the stock selling at levels that make it an attractive bargain.

I would argue that unprecedented times throw into question any use of conventional metrics. In fairness, that applies to either a bullish or bearish argument. However, I believe good stocks don’t suddenly become bad. And history has shown 3M to be a very good stock for investors.

MMM Stock Has Rewarded Buy-and-Hold Investors

When the stock market is on a bull run, the virtue of buy-and-hold investing always gets put under the microscope. After all, why would you want to settle for singles when you can hit home runs? But for investors who bought MMM stock in the last 10 years, they enjoyed the best of both worlds.

As of Jan. 1, 2020 investors who owned shares of MMM stock on Dec. 18, 2019 would enjoy a total return of 10.57%. That’s above the New York Stock Exchange average of approximately 6.5%. And that’s without factoring in dividends.

But when you factor in dividends, MMM stock has given shareholders a total return of 124.4%. That essentially doubles the average return for the industrials sector over that same time period (63.9%). And dividends have to be factored in because 3M has one of the most reliable dividends available. It belongs to the exclusive category of companies that are dividend kings, meaning it has increased its dividend every year for over 50 years.

At this point, the astute investor is saying “past performance doesn’t equal future results”. And that would be correct. But I can argue that the recent performance of MMM stock good and bad is the anomaly. Investors that are souring on the stock have a case of mistaken identity.

Don’t Be a Prisoner of the Moment

3M is a dividend king. It has increased its dividend every year for the last 61 years.  In and of itself, that does not make MMM stock a buy. But for investors looking at total returns over time, there are few stocks that have delivered for shareholders like 3M.

The historical chart for MMM stock shows the gradual upward slope that investors love. Yes, it broke from its pattern in the last couple of years. But you could say the same thing for nearly every well-performing stock. And that means that the decline is sharp as well.

Ultimately, 3M is not about masks or ventilators. It is about its core products. And that market will come back. That may not happen in 2020. And that’s why growth investors may want to stay away. But pure growth stocks are going to be hard to find. MMM stock makes sense for customers wanting reliable income now and the opportunity for a solid total return over time.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing Chris Markoch did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/04/history-favors-investors-who-believe-in-3m/.

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