After 97 Years, 3M's Dividend Is Going Strong

3M is one of the most diverse companies in the world and that gives it a strong dividend for investors to own for years to come.

Jun 21, 2014 at 1:00PM

The Dow Jones Industrial Average (DJINDICES:^DJI) doesn't contain the most exciting names on the market, but it does contain some of the best blue chip stocks there are. These are large, diverse companies with consistent cash flows and consistent dividends.

One of the best of those dividend payers is 3M (NYSE:MMM), which has been paying a dividend for 97 straight years and has increased its payment for 56 consecutive years. So how does 3M do it? Let's take a look at this unique business.  


Scotch Tape has become an iconic product and a consistent revenue source for 3M.

3M's dividend powerhouse
Last year, 3M generated $30.9 billion in revenue and $4.7 billion in earnings from five major businesses around the world. In fact, more than 70% of 3M's revenue comes from outside the U.S., so the company is diverse not only in the industries it serve, but the locations as well.


Post-it Notes grew into flags, one of many product line extensions 3M has done.

The plethora of products 3M makes starts in the lab, where 3M is known as one of the best research companies in the world. Products like Scotch tape, the Post-it Note, brightness enhancement film, and sandpaper all originated in the lab and spread their way across the country. The expertise the company has makes it a go-to for customers large and small, particularly in sandpaper, adhesives, and display films.

From my experience, the lab at 3M often focuses on new technologies and products and not necessarily serving a specific end market, but that's one of the keys of the company's diversification. There are over two dozen divisions, but they're categorized into big businesses of Industrial, Health Care, Safety & Graphics, Consumer, and Electronics & Energy. This structure allows 3M to focus research and sales efforts to specific markets, while still cross-pollinating products into adjacent industries.


The display business has even brought 3M into making large displays like this one.

From a cash flow perspective, 3M's focus on technology allows it to command high margins for its products. In 2013, operating margins were 21.9%, incredibly high for such a diverse company. Return on invested capital was also 20%, so manufacturing capital is being deployed quickly, even leading to a free cash flow conversion of 89%.

3M isn't the exciting growth company it was a few decades ago, but it's diversified into five huge end markets and nearly every part of the world, and it has the R&D muscle to keep returns and cash flow high for years to come. With companies cutting back on expenses like research and new investment dollars going into tech and not industrial innovation, 3M is in a unique position to capitalize on decades of expertise in a number of markets to make new products possible. It happened with the iPhone, which had six 3M films in it, something few investors know. 3M isn't the company you'll see grabbing headlines day after day, but it's more important than you think, and that position in our society makes this a dividend worth owning -- and one that has a high likelihood of being safe for the next century as well.

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Travis Hoium manages an account that owns shares of 3M. The Motley Fool recommends 3M. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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