2021 Week 18: 3M Co (NYSE: MMM)

Portfolio Update

The FiveTwenty portfolio received no dividends in the past week.

Past Week Dividend$0
Current Quarter Dividend$0
LifeTime Dividend$113.04
Estimated Annual Dividend$1,365.10
Dividend Scorecard

The capital allocation for the week of 05/02/2021 to 05/08/2021 will be used to add to our position in 3M Co (NYSE: MMM)

MMM – Position Update

Since our last check-in on MMM in week 9 of 2021, the company reported Q1 2021 earnings on 04/27/2021. Additionally, the share price has appreciated 13.96% from $175.06 to $197.14.

TTMPrev. Update10-year median
Dividend Streak63 years63 years
Yield2.97%3.36%2.48%
Payout Ratio60.10%63.37%54%
P/E20.3118.9319.89
Entry Criteria Scorecard

Q1 2021 earnings report

Did MMM’s latest earnings report raise any warning flags?

In Q1 2021, MMM saw robust revenue growth across all 4 segments compared to the same period a year ago. Revenues grew 13.7% in Safety and Industrial, 13.1% in Transportation and Electronics, 9.8% in Consumer, and 6.8% in Health Care. (Divestiture in the Health Care segment had a -5.6% impact on revenues for the segment.) Overall, revenues grew 9.6%, net earnings increased 24.1%, and EPS were 23.1% higher compared to Q1 2020.

Revenue
(in millions)
Net earnings
(in millions)
EPS
.
Q1 2020$8,075$1,308$2.25
Q1 2021$8,851$1,624$2.77
% Change9.6%24.2%23.1%

Additional noteworthy developments during the quarter:

  • In February, MMM announced that it will spend ~$1 billion dollars over the next 20 years to accelerate its sustainability commitments. The company’s goals are: carbon neutrality by 2050, 25% water use reduction by 2030, return higher quality water after use in manufacturing operations by 2024.
  • MMM returned a total of $1.1 billion to shareholders in the quarter in the form of dividend payouts and share repurchases.
  • The company reduced total debt by $0.6 billion and net debt by $0.7 billion.

Looking ahead, management reiterated full year 2021 guidance unchanged. EPS is expected in the $9.20 to $9.70 range with full-year sales growth in the 5-8% range. Additionally, MMM indicated that it expects -$0.30 to -$0.50 per share headwinds for FY 2021 related to raw materials and logistics costs.

Thesis

Why are we adding ot our position in MMM?

MMM posted solid Q1 2021 earnings results, Thereby confirming our original investment thesis. Additionally, even though the share price has grow by about ~14% since our initial investment, the yield, TTM PE ratio and payout ratio still compare favorably to historical values.

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