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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Stock of the Week


February 13th 2009 3M
NYSE symbol: MMM
Industry: Conglomerate
Price as of 2/13: $49.42

Dividends have been a welcome cushion in the stock market particularly in tough times. According to data from Ned Davis Research, companies that have increased dividends for at least five years beat the market in every year from 1972 to 2008. But with many companies cutting or eliminating their payouts to shareholders, relying on them has become more elusive. This week I'll feature a Dow component that actually raised its dividend this week. The featured stock of the week is the vast conglomerate, 3M.
Popular for their Post-It notes, 3M reported a profit of $536 million, or 77 cents a share, down 37%. Fourth-quarter sales declined 11.2% to $5.5 billion. All business segments saw sales decline except for healthcare and the safety and security unit. 3M is not immune to the economic slowdown. The company is streamlining operations reducing capital expenditures by 30%, and aggressively attacking working capital in order to conserve cash. Having said that, the company scaled back its 2009 earnings forecast to a range of $4.30 to $4.70 per share from $4.50 to $4.95 per share. Management didn't sugar coat the business environment. They believe the first quarter will be worse than the fourth quarter. In fact, they expect the first quarter to one of the toughest quarters that the company has seen in quite some time and yet they still expect to make $3 billion dollars for the full year.
3M is trading for 12 times earnings and 11 times next years earnings. The stock also trades for 1.5 times sales and 3.5 times book value. The best part is the dividend yield of 4%. The stock goes ex-dividend on Wednesday of next week so investors can buy the stock on Tuesday and still get the dividend.