{"id":78848,"date":"2023-10-31T07:15:57","date_gmt":"2023-10-31T11:15:57","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/3m-could-get-cut-in-half-so-buy-these-8-yielding-swans-nysemmm\/"},"modified":"2023-10-31T07:16:12","modified_gmt":"2023-10-31T11:16:12","slug":"3m-could-get-cut-in-half-so-buy-these-8-yielding-swans-nysemmm","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=78848","title":{"rendered":"3M Could Get Cut In Half, So Buy These 8%-Yielding SWANs (NYSE:MMM)"},"content":{"rendered":"
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3M Company<\/strong> (NYSE:MMM<\/span>) is a legendary dividend king with a storied 101-year history and a laudable dividend growth streak of 64 years.<\/p>\n

Last time, I warned that the facts on 3M had changed and that the risks were rising of a potentially significant dividend cut.<\/span><\/p>\n

Since then, 3M’s stock has fallen almost 20%, and we’ve gotten new earnings, management guidance, and the bond market. Analysts have weighed in on what they think about the future of Minnesota Mining and Manufacturing (what 3M stands for).<\/p>\n

That slide includes a 5% single-day earnings pop, which has rapidly faded.<\/p>\n

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Ycharts<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

3M is now trading at a forward P\/E of 9, a nearly anti-bubble valuation that some might consider a Warren Buffett-style “greedy when others are fearful” opportunity.<\/p>\n

However, after crunching the earnings numbers, I have bad news about 3M’s 7% yield.<\/span><\/p>\n

And there are two legendary dividend Ultra SWANs (sleep well at night) world-beaters who have very secure 8% yields you should be able to trust today, tomorrow, and for whatever might come in the next few decades.<\/p>\n

Bottom Line Up Front: Even If 3M’s Dividend Survives, It’s Not Necessarily A Great Long-Term Investment<\/h2>\n

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FactSet Research Terminal <\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

At first glance, this might seem like good news.<\/p>\n

20 analysts cover MMM for a living. Combined with the bond market and rating agencies, this expert consensus knows this company better than anyone other than management (and possibly even better).<\/p>\n

Analysts expect 3M’s dividend to remain the same and grow at 3.4% annually through 2025.<\/p>\n

That’s certainly better news than a forecasted cut…but there are two important things to know.<\/p>\n

First, 9 months ago, 3M’s dividend consensus forecast went out to 2028.<\/p>\n

6 months ago, 2027.<\/p>\n

3 months ago 2026.<\/p>\n

Now it only goes to 2025.<\/p>\n

That’s because no analyst is willing to gamble their reputation about 3M’s dividend in 2026.<\/p>\n

For a dividend king that’s been raising its dividend since 1959, that’s a potentially disturbing decline in dividend visibility.<\/p>\n

The most troubling thing of all, though?<\/p>\n

That 3.4% dividend growth rate might not be just for the next few years due to legal liabilities.<\/p>\n

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FactSet Research Terminal <\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Before earnings, 3M’s growth outlook was 6.3%.<\/p>\n

It’s been cut in half since earnings, indicating that analysts think the dividend won’t be growing at a token rate just for a few years but potentially forever.<\/p>\n

<\/span><\/p>\n\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n\n\n\n\n
Investment Strategy<\/strong><\/td>\nYield<\/strong><\/td>\nLT Consensus Growth<\/strong><\/td>\nLT Consensus Total Return Potential<\/strong><\/td>\nLong-Term Risk-Adjusted Expected Return<\/strong><\/td>\n<\/tr>\n
Schwab US Dividend Equity ETF<\/strong><\/td>\n3.9%<\/strong><\/td>\n9.70%<\/strong><\/td>\n13.6%<\/strong><\/td>\n9.5%<\/strong><\/td>\n<\/tr>\n
Nasdaq<\/td>\n0.8%<\/td>\n11.2%<\/td>\n12.0%<\/td>\n8.4%<\/td>\n<\/tr>\n
REITs<\/td>\n4.6%<\/td>\n7.0%<\/td>\n11.6%<\/td>\n8.1%<\/td>\n<\/tr>\n
Dividend Aristocrats<\/td>\n2.3%<\/td>\n8.5%<\/td>\n10.8%<\/td>\n7.6%<\/td>\n<\/tr>\n
3M<\/strong><\/td>\n6.9%<\/strong><\/td>\n3.70%<\/strong><\/td>\n10.6%<\/strong><\/td>\n7.4%<\/strong><\/td>\n<\/tr>\n
S&P 500<\/td>\n1.7%<\/td>\n8.5%<\/td>\n10.2%<\/td>\n7.1%<\/td>\n<\/tr>\n
JEPI (Management Guidance)<\/td>\n5%<\/td>\n3.00%<\/td>\n8.0%<\/td>\n5.6%<\/td>\n<\/tr>\n
60\/40 Retirement Portfolio<\/td>\n2.1%<\/td>\n5.1%<\/td>\n7.2%<\/td>\n5.0%<\/td>\n<\/tr>\n<\/table>\n

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