Stock analysis 3M

In the last weeks the stock market decided to go down a bit, and especially one stock got really hammered in terms of the stock price. It is one of the best dividend paying companies in the world and currently has a stock price which seems to be very cheap. I am talking about 3M, so let’s have a look at it if it is worth an investment.

Overview

3M Company (MMM) is a diversified technology company. The company operates in six business segments: Industrial and Transportation, Health Care, Consumer and Office,Safety, Security and Protection Services, Display and Graphics, and Electro and Communications. 3M was founded in 1929, and is based in St. Paul, MN. In February 2014, 3M acquired Treo Solutions, a healthcare data intelligence and analytics company. 3M is largely affected by prices for raw materials and purchased components, as well as improving operational efficiency and productivity. 3M is a dividend aristocrat and has been consecutively increasing its dividend annually since 1959. 3M pays its dividend quarterly.

Dividend Data

MMM has increased their dividends  since 60 years. This is quite an impressive streak of dividend increases which makes the stock one of the best dividend paying companies. The latest increase was 6%, which is still a good growth rate given the long period of dividend increases.

Dividend: Currently the company pays a yearly dividend of 5.76 USD, which equals a yield of 3.41%. The latest dividend increase was at 6.0%, which is slightly below my goal of having a yearly increase of 7.5%.

Payout Ratio: The current payout ratio is at 56.1%, which is on a very good level given the latest increase and the long history of dividend increases.

Stock Price

The share price of MMM is down by almost 11.45% on year to date basis. This fact makes stock look quite cheap at the moment with a price of 169.09 USD.

Valuation

Price/Earning: The current P/E ratio is currently at 17.95, the 5 year average is at 23.27. So based on the P/E ratio the stocks looks really cheap at the moment.

Price/Book: The price/book ratio is a bit above the 5 year average. The current P/B ratio is at 10.05 compared to its 5 year average of 9.12.

Free cashflow: The company has enough free cashflow to cover the dividend and to increase the dividend in the upcoming years. So the company should definitely not have any cashflow problems in the future.

Debt/Equity: The current debt/equity ratio is at 1.61 which is a bit high at the moment, especially concerning the fact the company has almost doubled their debts in the last 5 years.

Growth: For 2019 the median EPS expectations are at 9.72 USD per share and for 2020 at 10.47 USD per share.

The Finbox Fair Value is at 164.91 USD, which means a downside of 2.9%

Conclusion

So having a look at the valuation of MMM the stock price looks attractive to pull the investment trigger but to be honest for me it is still a bit too expensive. Divdend history is great, the yield as well but the fundamentals were better 4 years ago. My target price therefore is at around 145 USD.

What do you think about 3M? Is it also on your watch list?

Disclosure: I do not recommend any decision to the reader or any user, please consult your own research. Thank you for your understanding!



1 Comment

  1. Thanks for the analysis Dividend Cashflow!
    3M was on my radar since I started investing a few years ago. It was just looking very expensive all the time until recently. I am thinking about it now, as probably a lot of dividend growth investors recently. I hope that the price will not go up and hopefully will even get lower before I have some savings to invest 🙂 It will definitely be one of my considerations for next purchase.
    BI

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