2022 Week 23: 3M Co (NYSE: MMM)

Portfolio Update

The FiveTwenty portfolio received $330.97 in dividends in the past week. AFL, BKH, ENB, FTS, INTC, SJM, and SWX paid their quarterly dividend during the week.

Past Week Dividend$330.97
Current Quarter Dividend (Q2)$798.61
LifeTime Dividend$4,083.28
Estimated Annual Dividend$5,372.67
Dividend Scorecard

The capital allocation for the week of 06/05/2022 to 06/11/2022 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 6 of 2022, the company reported Q1 2022 earnings on 04/26/2022. Additionally, the share price decreased 9.2% from $160.73 to $145.97 during that period.

TTMPrev. Update10-year median
Dividend Streak63 years63 years
Yield4.07%3.68%2.52%
Payout Ratio59.40%158.50%
P/E14.60115.88
Entry Criteria Scorecard

1 computed using TTM adjusted EPS of $10.00 as of Q1 2022

Q1 2022 earnings report

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

For Q1 2022, MMM’s financial results beat expectations for both revenue and adjusted EPSs. However, revenue, adjusted net income and adjusted EPS were lower than the same quarter the previous year. Overall, revenue decreased 0.3%, adjusted net income dropped 11.8%, and adjusted EPS were 10.2% lower than in Q1 2021.

Revenue
(in millions)
Adj. Net Income
(in millions)
Adj. EPS
.
Q1 2021$8,851$1,727$2.95
Q1 2022$8,829$1,524$2.65
% Change(0.3)%(11.8)%(10.2)%

Additional noteworthy developments during the quarter:

  • The company started to report adjusted earnings that exclude the cost related to litigation in order to provide additional clarity of the business performance.
  • MMM returned $1.6 billion to shareholders via dividends and share repurchases in Q1 2022.
  • On 05/10/2022, MMM declared a dividend of $1.49 per share payable 06/12/2022 to shareholders of record as of 05/20/2022.

Looking ahead, the company expects full year 2022 adjusted earnings per share in the range of $10.75 to $11.25. GAAP earnings per share were adjusted down to a range of $9.89 to $10.39 from prior expectations of $10.15 to $10.65. The adjustment to GAAP earnings was made to incorporate the $0.26 per share charge in Q1 2022 for Zwijndrecht -related PFAS costs.

Thesis

Why are we adding to our position in MMM?

We continue to believe in the long-term strength of MMM’s business. The PFAS litigation related risks and expenses have put downward pressure on earnings and share price. However, we do believe MMM has the resources to successfully navigate these headwinds and continue to grow the business in the medium to long term.

Therefore, we are adding to our position at a very attractive staring yield and valuation.

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