3M (MMM) 2013 Review

The 3M Company (formerly Minnesota Mining and Manufacturing) is a broadly diversified technology and manufacturer of great brands in industrial, health care, graphic and display, office, communications, transportation, and safety and security products (50,000 products sold in over 65 countries). After a difficult 2008-2009, the company is enjoying a resurgence of growth in sales and profits as it transformed its business strategy.  The company earns over a 20%+ return of equity and has generated profit growth of 10% annual rate over the past 10 years. While dividends have not kept pace as the company reinvested cash flow in new businesses, the dividend pay out ratio should increase in the next several years.  The pillars of its business plan are:

(1) transform its manufacturing footprint from US oriented to international based and improve its productivity,

(2) invest in strengthening and streamlining its supply chain,

(3) increase its brand building marketing focus on high growth overseas markets, using acquired local or regional brands where it makes sense,

(4) raise its investment in R&D to advance the 3M brands,

Negatives:

(1)    its large international business exposes it to currency fluctuation risks,

(2)    its businesses are highly competitive,

(3)    a majority of its products are economically sensitive.

       MMM is rated A++ by Value Line, carries a 22% debt to equity ratio and  its stock yields 2.4%

   Statistical Summary

                 Stock       Dividend       Payout      # Increases  

                Yield      Growth Rate     Ratio       Since 2003

MMM        2.4%           7%             36%             10

Ind Ave * 

                Debt/                        EPS Down       Net        Value Line

                Equity         ROE      Since 2003      Margin       Rating

MMM       22%            23%           2                 16%          A++

Ind Ave*

*the Diversified Company Industry operates in so many varied products and services, comparable numbers would be of little analytical value.

 

     Chart

            Note: 3M stock made good progress off its March 2009 low, quickly surpassing the downtrend off its October 2007 high (red line) and the November 2008 trading high (green line).  Long term, 3M is in an uptrend (straight blue line is the lower boundary).  Intermediate term it is in an uptrend (purple lines).  The wiggly blue line is on balance volume.  The Dividend Growth and High Yield Portfolios own full positions in 3M.  The upper boundary of its Buy Value Range is $71; the lower boundary of its Sell Half Range is $157.

http://finance.yahoo.com/q?s=MMM

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