3M manufactures a diversified array of industrial products. Known especially for popular consumer products such as:
MMM’s current 10 year dividend growth rate is 6.16%!
Any investor, who’s main goal is to preserve capital, should seek, in all his or her investments, a significant difference between the current value of a business and the price in which the business can be bought. This insures protection in case of an unfavorable event and to maximize the investment return if the analysis is confirmed.
In the words of his disciple, Warren Buffett: “Never depend on a good sale. Get a purchase price so attractive that even a mediocre sale will produce good results.
Although given the title of “Dividend King” we must be vigilant in maintaining price discipline. We typically purchase operating companies at 8-10 times Cash Flow. However, a stock like this warrants special attention due to its size and dominance of their market. Chances are no other company will be able to purchase this behemoth of a company, therefore we will put a value on the business of 30 times Cash Flow. The goal is to purchase operating companies for at least half their value, with that said we will purchase this company up to 15 times Cash Flow.
Conclusion & Valuation
MMM has consistent rising dividends, strong cash flow, and very low debt!
I am buying up to $84.45 and not a penny more!