Photo by Dimitri Karastelev on Unsplash

3M (MMM) is a diversified technology company with a global presence in the following businesses: Safety and Industrial; Transportation and Electronics; Health Care; and Consumer. 3M is among the leading manufacturers of products for many of the markets it serves. Most 3M products involve expertise in product development, manufacturing and marketing. 

Century Of Innovation 

Founded in 1902, Minnesota Mining and Manufacturing started as five businessmen set out to mine a mineral deposit for grinding-wheel abrasives. The deposits proved to be of little value so the focus shifted to sandpaper products.

Over the past century of innovation, 3M invented everything from masking tape to Post-it Notes. During the pandemic, 3M was a crucial supplier of respirators. While 3M is 120 years old, the company continues to churn out new products like a young startup. Research and development remains the heartbeat of 3M with the company spending $2 billion, or 6% of sales, in 2021 on research and development to drive organic growth and new products.

The strength and stability of 3M’s business model and strong free cash flow capability enables the company to invest through business cycles. Investing in 3M’s business to drive organic growth and deliver strong returns on invested capital remains the first priority for capital deployment. To maximize value for shareholders, 3M expects to continue returning cash to shareholders through dividends and share repurchases. 

2021 Results  

In 2021, 3M reported a 10% increase in sales to $35.4 billion with net income and EPS each increasing 8% to $5.9 billion and $10.12, respectively. 3M was able to partially offset inflation pressure during the year with pricing actions.

During 2021, 3M generated a superb 39% return on shareholders’ equity and a healthy 19.5% return on invested capital.

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3M produced robust free cash flow of $5.9 billion in 2021. This strong free cash flow enabled the company to reduce net debt by $1.2 billion, pay $3.4 billion in dividends and repurchase $2.2 billion of its own shares during 2021.

Steady Dividend Growth

The 3M Board of Directors recently increased its quarterly dividend 1% to $1.49 per share for the first quarter of 2022, marking the 64th consecutive year of dividend increases. The dividend currently yields a very attractive 4%. 3M has paid dividends to its shareholders without interruption for more than 100 years, an enviable track record. 

3M has returned over $14 billion to shareholders through dividends and share repurchases over the last three years. Returning value to shareholders remains a priority for the company as it moves forward.

2022 Outlook 

In 2022, 3M is expecting total sales growth of 1% to 4%, which includes organic sales growth of 2% to 5%, EPS of $10.15 to $10.65 and robust cash flow. Included in this guidance is an anticipated decline in COVID-19 related disposable respirator demand in 2022, resulting in a headwind to organic growth of 2% and EPS of $.45. The company also expects to generate $7.3 billion to $7.9 billion in operating cash flow in 2022, contributing to 90% to 100% free cash flow conversion. In 2022, 3M plans to invest about $4 billion in research and development and capital expenditures. The company is seeing the rate of increase in inflation slowing as they enter 2022. As previously announced, 3M plans to divest its Food Safety business in 2022 receiving $1 billion in consideration.

Long-term investors may find this high-quality and innovative company with robust cash flows, steady dividend growth and profitable operations to look MMM-MMM good at current valuation levels. Buy.