The Dow Jones Industrial Average (^DJI +1.24%) has hovered near breakeven all day Tuesday as the Federal Reserve began a two-day policy meeting. Tomorrow afternoon, we'll learn the Fed's plans for its $85 billion monthly bond-buying program, which could be rolled back to reduce monetary stimulus. Essentially, today's trading is the calm before the storm that comes tomorrow.
One Dow stock that's had an outstanding day is 3M (MMM +2.60%), which had jumped nearly 3% in trading just before 3 p.m. EST. This morning, management announced a 35% increase in its first-quarter dividend to $0.855 per share, which would give the stock a 2.6% yield. To top it off, management also said it would spend between $17 billion and $22 billion on gross share repurchases from 2013 to 2017, up from a previous range of $7.5 billion-$15 billion.
That's a strong increase in returns to shareholders, which is made possible by increasing organic growth at the conglomerate. Through 2017, management also said it expects 4%-6% organic revenue growth and 9%-11% earnings growth. 3M has struggled to exceed 4% organic growth over the past decade, but CEO Inge Thulin's emphasis on the company's roots of research and development appears to be paying off.
3M's return to growth
3M struggled with growth in the year after Thulin took over as CEO in February 2012, as you can see below. That's in part because former CEO George Buckley had boosted growth through acquisitions, something Thulin slowed. Instead, the new chief executive invested in R&D, which has a lagged effect on revenue.
MMM Revenue (Quarterly YoY Growth) data by YCharts.
But you can also see that growth picked up over the past couple quarters, and now organic growth is expected to be 4%-6% over the next four years. That's a solid growth rate that would validate Thulin's strategy.
A return to growth gives 3M's stock a lot of upside, both for stock returns and dividends, which have been paid to investors for 97 straight years. This is a solid dividend stock if I've ever seen one.
