Sticky little yellow pieces of paper are just one of the many ways that 3M has been a leader in innovation throughout its history. Decades ago, innovations like Scotch Tape and Scotchguard were highly visible new products that achieved general notoriety. But more recently, much of what 3M Co (NYSE:MMM) makes is components that improve other manufacturers’ products, such as films for mobile devices and displays. With other companies’ brand names on those products, 3M Co (NYSE:MMM) gets less exposure for its contributions, even though those business segments are successful.
The question is where 3M’s growth will come from in the future. Recently, its organic growth has flagged, raising concerns that 3M is merely becoming a mature, dividend-paying value stock with little future growth potential. The company has turned to acquisitions, such as its recent buyout of Ceradyne, to help boost its footprint. But for 3M Co (NYSE:MMM) to remain true to its roots, it needs to innovate from within to drive sales and profits higher.
One area where 3M hopes to see growth is the natural-gas industry. By developing fuel tanks for natural-gas-powered vehicles in conjunction with Chesapeake Energy Corporation (NYSE:CHK) , 3M hopes to tap into the budding market for new applications for the plentiful and cheap fuel. Yet rival General Electric Company (NYSE:GE) has a huge presence in the energy industry, with its wind turbine segment dominating the alternative-energy space. GE also has its own partnership with Chesapeake to help set up a network of natural-gas filling stations across the country. If 3M wants to succeed in energy, it will have to work hard to find its own niches within the broader space to drive profit growth, or else competition from General Electric Company (NYSE:GE) could hamstring its efforts.
For retirees and other conservative investors, the fact that 3M Co (NYSE:MMM) has one of the longest dividend-raising streaks in the Dow is a definite positive. An elevated valuation as the stock hits all-time highs is a reason to hesitate, but over the long haul, 3M should be able to justify a slight premium if it can get back into its innovative groove.
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The article Will 3M Help You Retire Rich? originally appeared on Fool.com and is written by Dan Caplinger.
Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends 3M. The Motley Fool owns shares of General Electric and has options positions on Chesapeake Energy.
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