Bert’s Recent Stock Purchases – MMM and XOM

After complaining in my last two monthly dividend income summaries about not making a stock purchase that month, my purchase moment finally arrived.   Man did it feel good coming off the sidelines.  The market is presenting us with some opportunities, so I’m sure there were plenty of other stocks to consider as well.  But for now, I was perfectly content adding to two Dividend Aristocrats that I already own.  Here is why I purchased 3M Company (MMM) and Exxon Mobil (XOM) recently.

The Strategy

Both of these stocks were purchased on dates when the market fell rapidly, and drastically.  On days like these, I try to focus on purchasing a certain type of company.  A company that passes the Dividend Diplomats’ Dividend Stock Screener, has a long history of dividend increases, is a titan in their industry,  and a company that has been around for a long time.  Both MMM and XOM check those boxes.

The next section will discuss each purchase in greater detail and run the company through our stock screener.  For each, we will use the stock price on the date of close, average analyst EPS per Yahoo! Finance, and their 5-year dividend average dividend growth rate per dividendinvestor.com.

Purchase #1: 3M Company (MMM)

3M Company (MMM) is one of my favorite companies to own.  They are one of my 5 “Always Buy” stocks for a reason.  Besides the dividend history, which I’ll touch on a little later, the company has power brands in both the consumer and business sectors.  For consumers, heard of Scotch-Brite, Bandaid,  Ace, Post-it, Filtrete, and Aqua-Pure?  Thought so.  While business brands are less known, the company has a strong presence in the automotive, communications, electronics, healthcare, and other sectors.  Think about that diversification for a second.  That’s why I am always excited to buy this company when the opportunity presents itself.

Let’s run MMM through our stock screener.  My purchase price was $165.00.  I’ll use an annual dividend of $5.76 per share and forward EPS of $9.41 per share.

  • P/E Ratio – 17.53X – Is MMM the worlds greater discount at this moment?  Nope.  However, when we screen for stocks, we start by comparing the company against the broader market.  MMM’s currently P/E ratio is below the S&P 500, which is in the low 20X range.
  • Payout Ratio – 61% – MMM’s current payout ratio is JUST above the 60% threshold we use in our stock screener.  I’m not losing any sleep over 1%.  If the company’s payout ratio were 81%, we may be having a different discussion (learn more about the Dividend Payout Ratio here).
  • HIstory of Increasing Dividends – MMM is a Dividend Aristocrat.  Scratch that, they are a Dividend King.  MMM has increased their dividend for 60 years.  It can’t get any better than that.  MMM also has a strong dividend growth rate.  Their 5-year average dividend growth rate is 13.63%.  So not only have they increased their dividend for 60 years, but their dividend growth rate has been pretty strong over the last five days as well.

MMM passed our stock screener.  So the purchase decision was made.   On 8/5/19, I made two purchases of 3M company:

  • I purchased 6 shares  in my portfolio
  • I also purchased 6 shares in my wife’s portfolio.

In total, the 12 shares added $69.12 in forward dividend income to my portfolio.  In my individual portfolio, I now own 24 shares.  I’m loving the position that I am building in this company.  If there price continues to fall, I may just add more.

Purchase #2: Exxon Mobil (XOM)

And now onto my second purchase.  Exxon Mobil is a household name in the dividend investing community.   Oil prices are volatile.  This has driven some investors away from the sector all together.  However, XOM is one of the oil major integrated oil companies that maintained dividend growth through the decades plummet in oil prices.   Their balance sheet is pretty strong compared to others in the industry as well.  For those reasons, I have been building our position in the company over the last few years.

It is XOM’s turn to be run through our stock screener.  Our purchase price was $67.99 per share.  I’ll use an annual dividend of $3.48 per share and forward EPS of $4.86 per share.

  • P/E Ratio – 13.98X – Like much of the other major integrated oil companies, XOM is trading at a multiple well below the market.  XOM passes this metric of the stock screener.
  • Payout Ratio – 71% – XOM’s dividend payout ratio is above our payout ratio threshold.  But their payout ratio is in line with CVX and the other major integrated oil companies.  There are some sectors where high dividend payout ratios are the norm.  Oil, utilities, tobacco are some of them.  In certain circumstances, it is okay to accept a payout ratio above your mark.  For this company, I am fine with a 71% payout ratio.
  • HIstory of Increasing Dividends – XOM is a Dividend Aristocrat.  As I mentioned earlier, the fact that XOM continued increasing their dividend through the big drop in oil prices this decade is an important fact.  That is because so many companies either cut or froze their dividend.  XOM continues to remain committed to their dividend growth.  XOM’s 5.08% 5-year dividend growth rate is solid and beats inflation.  Their last dividend increase was 6% and was announced in April.

XOM passed our stock screener.  So on 8/14/19, we made a purchase in my wife’s portfolio.  We added 20 shares of XOM to her portfolio.  This added $69.60 in dividend income to my portfolio.  Among our portfolios, we now own 63 shares of the oil giant.

Summary

Man does it feel great to be back in the game.  I needed these last few months to realize how bad I wanted to push forwards towards financial freedom.  This is another baby step in our journey there.  By purchasing these two companies, we added $138.72 in dividend income to our portfolios.  I was able to make these purchases before their ex-dividend dates as well. So I will capture the September dividend.  Success!   The stock market will continue to put downward pressure on these positions.  So if the price of MMM and XOM continues to fall, I will gladly scoop some more shares up.  After all, these are both fantastic companies!

What do you think of MMM and XOM at their current prices?  Would you avoid all oil companies if you were me?  What are your thoughts about MMM? Are they too exposed to other economies?   What companies have you been adding during this downturn?

Bert

Facebooktwitterredditpinterestlinkedinmail

31 thoughts on “Bert’s Recent Stock Purchases – MMM and XOM

  1. I picked up some more MMM at $157.50 earlier this week. I missed out on the next dividend payment but I’m not worried. 3M is a high quality business with great diversification plus the dividend yield was in the 97th percentile or so since 1990. I also added some CSCO on the big drop this week. I’ve been wanting to add to my position but CSCO really took off after I made my initial buy. I was glad to double my position, lower my cost basis and pick up around a 3% starting yield. ADM keeps eluding me but I think it won’t be long until I add more shares of them too.

    • I just love 3M’s strong history and diversification, as you mentioned. Brands aren’t everything. But it is crazy how much they dominate in so many sectors. CSCO is an interesting one. I haven’t done too much research, I just saw they fell after earnings. But what’s fun is seeing the buying spree you have been on! ADM is interesting. Their price is falling and its hard to avoid. But they are the one company that I am the most worried about in the trade war. If what was being written was true, and China is not purchasing US grain, then there could be a major shakeup in the industry. That’s why I have been hesitant to invest more in ADM. But the company has persisted through other economic downturns and still increased a dividend, so maybe it is time to get past that feeling and invest in them.

      Bert

  2. One word for these buys.

    SMART !!!!

    Buy above average companies at below average valuations with above historic average dividend yields.
    You hit the trifecta good sir. I also added on to my position in MMM. Would have bought some XOM at the current above 5% dividend yield, but alas, I just couldn’t find any more change under the couch cushions.

    Yieldchart.com shows that the dividend yield for both of them to have been higher less than 5% of the time over the past 24 years. Reversion to the mean will happen, and Bert will look like any investing genius.

    • Thank you very much Boyd! That is very kind of you to save. Like you said, times like these, and flash sales, call for investing in the companies that have been there, done that. XOM, MMM, and plenty of others have met those criteria and will continue to do so.

      Bert

  3. Good to see you getting back into the fray! My thoughts … XOM may have a few troubles over the next year while the worldwide supply/demand shakes out – particularly if a economic slowdown hits. Given your long-term view, I doubt you’ll lose much sleep.

    3M was on my shortlist but I went with BLK instead. Both are underweight in my portfolio, I suspect I’ll get another shot at 3M soon. By the way, Isn’t Band-Aid a JNJ brand? I think the 3M comparable is the Nexcare line.

    • Charlie,

      I agree bout XOM. Oil will face some short-term headwinds. In the long run though, it;ll be just fine. I actually think you are right about the brands. I don’t know why I always get that one mixed up….Thanks for the reminder.

      Bert

  4. Good shares you picked up Bert,

    I add MMM as well
    In XOM I have no position because I am well positoned by BP and RDS Shell.
    I also pick a few shares of GPC – Genuine Parts which are very attractively valued

    Let the snowball rolling
    Willem

    • Thanks Willem. I also own Shell and BP and may add to Shell if their price remains the same. I didn’t see GPC at these levels. But it is a company I have always wanted to add to over the years. Thanks for pointing that out, because their price has tumbled. I’ll have to look more into them and see what is going on.

      Bert

  5. I own both stocks too, Bert. I would buy at the current levels, so I’m on board with your thoughts on the two companies.
    Glad to see you swimming in the investment waters again. I know you will keep adding as you can!

  6. I have also added MMM, EMR, and PFE. I have opened my position in XOM @$67.46. That’s a big deal for me. I commented a month ago in one of your blogs that I am looking for an entry point @$67 for XOM.

  7. Congrats on adding $139 in dividend income! I liked XOM at my cost basis of ~$77 a share, so I love it below $70. Same goes for MMM as well.

Leave a Reply

Your email address will not be published. Required fields are marked *