No discussion of industrial stocks with long histories of financial dominance is complete without 3M Co (NYSE:MMM), formerly known as Minnesota Mining and Manufacturing. This Dow Jones Industrial Average component is the gold standard for dividend stocks.
3M Co (NYSE:MMM) doesn’t often get much attention in the financial media. But industrials such as 3M play an important role in society, and this company in particular has a long and proud history of success. Investors looking for slow-and-steady growth and reliable dividends would be wise to consider 3M, but after a strong rally over the past several months, is now the time to buy?
Compelling shareholder returns
One of the best reasons to own 3M Co (NYSE:MMM) is its long-held policy of returning large portions of its cash flow through to shareholders via dividends and buybacks. Even better, 3M has a long track record of increasing the levels of these rewards on an annual basis.
In February, 3M Co (NYSE:MMM) announced it will increase its dividend by 8%. Not only that, but the company also announced it had authorized a $7.5 billion stock buyback program. The dividend raise marked the 55th consecutive year of dividend increases. Furthermore, 3M has paid uninterrupted dividends to shareholders for an amazing 96 years in a row. Over the past ten years, the company has returned $32 billion to shareholders through a combination of dividends and share repurchases, or 89% of reported net income.
It’s worth noting that 3M Co (NYSE:MMM) isn’t the only diversified industrial that treats its shareholders well. Diversified global industrial manufacturer Dover Corp (NYSE:DOV) has an impressive track record itself. Last year, the company raised its dividend 11%, representing the 57th consecutive year of a dividend increase. That record is the fourth-longest streak of dividend increases of any publicly listed company according to Mergent.
Of course, no company can maintain this kind of streak without the supporting underlying fundamentals, which Dover Corp (NYSE:DOV) has. Dover's full year 2012 revenue and diluted earnings per share from continuing operations climbed 10% and 11%, respectively, versus the prior year.
Another diversified industrial with a similarly long history of dividend growth is Emerson Electric Co. (NYSE:EMR), which last raised its dividend in the fall of 2012. Emerson has a fantastic track record of raising its dividend for 55 consecutive years.
That being said, investors may have been disappointed by Emerson Electric Co. (NYSE:EMR)’s last dividend bump. Emerson increased its dividend by just one penny per share last year, amounting to just a 2.5% increase.
Great businesses in the industrial space
Companies within the industrial sector don’t have exciting businesses. They aren’t likely to be featured in the financial media as the next hot sector or major growth story. At the same time, they provide necessary functions to our society. They manufacture and distribute real, tangible things that build our very infrastructure and contribute heavily to the economy.
3M, Dover, and Emerson Electric are all well-run, extremely profitable businesses. While we can quibble with their valuations, certainly a valid concern with each of these stocks trading for more than 17 times earnings, you can’t argue with the quality businesses these blue-chips operate.
That being said, I’d consider 3M, as well as Dover and Emerson to be solid holds. They aren’t screaming bargains and have rallied significantly in recent months. To illustrate, consider that these stocks’ dividend yields have fallen below 3% annualized.