How Does 3M’s Dividend Yield Curve Look?
A look at 3M’s revenue and earnings
Let’s look now at 3M (MMM), an MNC (multinational corporation) conglomerate functioning globally. 3M noted a 1.0% fall in 2016 net sales compared to 5.0% for 2015. That was due to growth posted by the industrial, safety, and graphics; healthcare; and consumer segments. Every segment, including electronics and energy, fell in 2015. Operating income posted a 4.0% growth in 2016 after a 3.0% fall in 2015. That was due to the decline in operating expenses, offset by the revenue performance. Diluted EPS (earnings per share) recorded an 8.0% growth in 2016 compared to 1.0% in 2015, despite increasing interest expenses. EPS growth was also supported by share buybacks.
3M has recorded a 3.0% revenue growth in the first half of 2017, driven by growth in every segment and flat growth in the consumer segment. Operating income posted an 8.0% growth, despite higher operating expenses due to higher gains on the sale of businesses. Diluted EPS posted a 15.0% growth despite higher interest expenses. EPS growth was also supported by share buybacks. The company has maintained an impressive free cash flow balance.
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3M’s dividend trajectory
3M’s dividend yield curve has recorded a downward path despite the dividend increase. That’s due to rising prices, as shown in the chart below. However, the dividend yield hasn’t fallen below the 2.0% mark yet.
Let’s look at two dividend ETFs with exposure to 3M. The Schwab US Dividend Equity ETF (SCHD) offers a 2.8% dividend yield at a PE (price-to-earnings) multiple of 20.3x. It has a 23.0% exposure to consumer non-cyclical and a 22.0% exposure to technology. The Guggenheim Dow Jones Industrial Average Dividend ETF (DJD) offers a 2.7% dividend yield at a PE multiple of 20.9x. It has a 20.0% exposure to industrials and an 18.0% exposure to technology.