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Is 3M Still a Good Choice for Dividend-Seekers?

Market sentiment doesn't change our high opinion of this wide-moat firm.

Joshua Aguilar
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Joshua Aguilar: Wide-moat-rated 3M is one of five diversified industrial firms that has consistently paid an annually increasing dividend for over 60 years. The stock currently trades at a slight 10% discount to our fair value and pays a solid forward dividend yield of 3.1%. We'd be buyers of the stock at our 5-star price of just below $150 per share.

We believe the market has overreacted to two key variables: 1) 3M's latest guidance cut; and 2) 3M's potential PFAS litigation exposure. Since Mike Roman has been at the helm for nearly a year, 3M has been forced to cut guidance on five different occasions. That said, 3M consists of short-cycle businesses that are notoriously hard to predict. Most of the slowdown has come from three distinct end markets which make up over 30% of its revenue base, which include automotive, electronics, and China. And the company simply missed reacting to slowing demand.

Joshua Aguilar does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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