And as an investor, I’m ok with that.
Men are notorious for letting a beautiful woman impair their judgment. But the same is true of beautiful stocks. Think of recent “attractive” stocks that have led many an investor to ruin: Apple (NASDAQ:AAPL) andFacebook (NASDAQ:FB) are two that come to mind. Like a glamorous date, it’s nice to be seen in public with an “it” stock. But chances are good it won’t be good for your wallet or for your long-term peace of mind.
This is not a stock you will ever brag about owning at a cocktail party. But frankly, you should. The stock has quietly pushed to new all-time highs, and it is beating the S&P 500 by a wide margin year to date.
But while 3M’s stock price performance has been spectacular, I’m more interested in the business and its consistency. 3M does quite a bit more than tape and sticky notes. They make everything from the reflective films that cover traffic signs to insulation for airplanes. But all of their products have a couple things in common:
- They perform their functions behind the scenes and are hardly ever noticed by anyone except the user. (Last time you were on your friend’s boat at the lake, did you ever stop to wonder what brand of sealant they used? Yeah, me neither.)
- They are the sorts of products that tend to get used up and need to be frequently replaced.
- When you need them, you need them. Whether it’s an ankle brace or flame-retardant film, demand for 3M’s products is generally pretty inflexible.
3M’s consistency is also shown in its dividend payments. The company has continuously paid a dividend for 97 years, and it has increased its dividend every year since 1959. Its current dividend yield of 2.3% may not be extraordinary, but the dividend has doubled since 2002. Had you bought 3M in 2002, you’d be enjoying a yield on your original investment of about 5%. Again, not extraordinary, but not half bad either.
3M will never double your money in a year, and you’re certainly not going to get rich quick owning it. But it’s one of those stable, consistent holdings that will quietly chug along, throwing off dividends, and never give you trouble.
If bought at a reasonable price, it’s also a stock that would be difficult to lose money owning over any reasonable time horizon. And at 15 times expected earnings, I would say its pricing is anything if not reasonable.
Disclosures: Sizemore Capital has no positions in any stocks mentioned.
About the author:
Mr. Sizemore has been a repeat guest on Fox Business News, quoted in Barron’s Magazine and the Wall Street Journal, and published in many respected financial websites, including MarketWatch, TheStreet.com, InvestorPlace, MSN Money, Seeking Alpha, Stocks, Futures and Options Magazine, and The Daily Reckoning.