As you might have read about it here, I now do live webinars and certainly have fun doing so. I have been surprised by the positive interest attendees had towards many of my stock picks. This is how I came to the idea of sharing here some of my “Video of the Week”, during wich I go through a company recent news or results and explain why I believe it is currently a good or a bad pick for a dividend investor.
Around for over a century, 59 consecutive years with a dividend increase and a price down 13% since the begenning of the year! Let’s see why you should not pass by the 3M (MMM) opportunity!
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00:00 Speaker 1: Hey fellow investors, this is Mike from Dividend Stocks Rocks, and welcome to the Dividends top pick of the week. This week, I want to discuss a company that has been around for over a century, that has been increasing its dividend for 59 consecutive years. But that has shown a great buying opportunity right now as the stock is down by 13% since the beginning of the year. In fact, 3M Corporation, ticker is MMM, has been down by 13%. So from 260 bucks all the way down to 200 lately, while the S&P 500 is up by about six, seven percent as of August 2018.
00:45 S1: So what’s going on with 3M? What’s wrong with it? Actually I would call it greed from the market. The thing is, over the past five years the stock has surged, almost doubled in value, and then took a hit, probably because the market isn’t that on the over-hype anymore. But when you look at the fundamentals and the reason why you should hold 3M in your portfolio, I think you’re gonna find that you should buy this one and sleep forever and probably pass it on to your children. First, 3M is a corporation that is probably more diversified than most balanced mutual funds that you can invest in. It’s dealing across the board, so over a 100 countries. It is producing goods for industrial, safety, graphic, healthcare, electronics, energy and even consumer industries, so they’re pretty much doing something for everybody. The best analogy that we can look at is the famous Post-it. So 3M has been the manufacturer of the Post-it, and 50% of their products are like a Post-it, which means that it’s a repeatable product. No matter how you like Post-it and no matter how good they are, once you’ve done using them, you have to put them in the recycle bin and buy a new pad. So each month, each quarter, you’ll have to buy more of those Post-its, and this is 50% of 3M business. Not the Post-it, but those kind of products that needs repeatable, reusable purchases.
02:28 S1: So basically, 3M is like a money making machine that just keeps printing all the time. In order to keep its edge, 3M is going through two major growth vector. The first one is, it invests massive amount, we’re talking about billions of dollars, in research and development each year. So they wanna make sure that they keep their technology edge against competitors. And when there’s a new technology emerging, when there’s a new company that is going higher and higher and then may eventually bug 3M, what they do is that they spend one to two billion each year in acquisition. So they have a lot of this expertise to just integrate new technology in their business and then use their wide distribution network and their strong brand recognition just to sell it across the world.
03:20 S1: To finish this video, I’d like to discuss dividend yield. 3M right now is offering a 2.70% yield, which is quite low. Historically over the past five years, you can look at yield of more around 2%, and thinking that in the past five years the dividend has more than doubled, you can see lots of growth over there. As I mentioned, since it’s a cash flow money-making machine, 3M is able to increase its dividend by six, seven percent most of the time, year after year. So you’re going to see its dividend payout doubling every five to 10 years. And it’s a perfect holding for pension plans or for RESPs. Disclaimer on my part, I do hold shares of 3M actually, in my pension plan portfolio and for my children tuition as well. However, you cannot take that video as a buy or sell recommendation. This was for just informational and a bit of entertainment purposes only. Therefore you cannot sue us if you’re losing money, but I’m still thinking that 3M is a good pick. Don’t forget to follow us on the YouTube channel and head over to Dividend Guy Blog, register to the newsletter to make sure that you don’t miss any of those videos. I’m gonna start doing them once a week so you’ll have some great picks over there. So thank you for listening and happy investing.