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How Dividends Change the Game for 3M Stockholders

The wealth-building power of compound interest will never cease to amaze me. It's a story of patience and attention to detail, where small, short-term differences add up to massive divergence over decades. And in the end, the biggest winners don't always deliver the fattest share-price returns.

Today, we'll take a closer look at industrial jack-of-all-trades 3M (NYSE: MMM  ) . 3M makes everything from Scotch Tape and Post-its to asphalt shingles and power lines, and that versatility helps the company perform in a variety of market conditions.

3M shares have largely kept pace with their peers on the Dow Jones Industrial Average (DJINDICES: ^DJI  ) over the last decade. But if you reinvested every dividend check in more 3M shares, a generous dividend policy helped shareholders beat the esteemed index by a comfortable margin.

MMM Chart

MMM data by YCharts.

The pride of the Twin Cities has enjoyed rock-steady revenue growth in the long run. Free cash flows have been less predictable, but on an even faster upward trajectory. That trend has allowed 3M to boost its payouts like clockwork, with plenty of headroom left for future increases. So far, 3M has paid uninterrupted dividends for 385 consecutive quarters (just over 96 years!) with annual increases for 55 years running. Past performance is no guarantee of future results, but that stellar track record does point to a high chance of shareholder-friendly policies in coming years.

MMM Dividend Chart

MMM Dividend data by YCharts. Shaded areas represent U.S. recessions.

3M's organic growth has stalled in recent years, replaced by growth by acquisition. Fellow Fool Travis Hoium is well aware of the macro risks to 3M's business model, but he also sees newly anointed CEO Inge Thulin pointing the company in the right direction. All things considered, it's hard to imagine a future where 3M's amazing dividend growth grinds to a halt.

With over 50,000 products, 3M plays a role in making everything from computers to power cables. A long history of invention and innovation has driven the company to its wide reach, but a focus on operational efficiency may be hurting the creative culture that once created Scotch Tape and the Post-its. A new leader has taken over and vows to return innovation to the forefront. Does this mean the stock will become more than a dividend, returning to its former glory as a growth stock once again? Find out whether 3M has what it takes to pull it off in The Motley Fool's comprehensive new research report on the company. Simply click here now to claim your copy today.

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9/23/2016 4:55 PM
^DJI $18261.45 Down -131.01 -0.71%
MMM $177.39 Down -2.46 -1.37%
3M CAPS Rating: ****