3M (NYSE: MMM) is one of the most wide-ranging conglomerates among the 30 stocks of the Dow Jones Industrials (DJINDICES: ^DJI). Many investors know 3M for its office supply products, but the company also makes key items for the energy, manufacturing, and healthcare industries and is a strong innovator in its field.
Investors in 3M have enjoyed strong gains over time, both through share-price appreciation and from dividend income. Yet one thing that 3M hasn't done for its shareholders in 15 years is to split its shares, and with the stock price having climbed precipitously in the past year, some believe that the conglomerate should make its move now. Let's take a closer look at 3M's past with an eye toward deciding whether 2018 could be the year a stock split finally happens.
When has 3M done stock splits?
3M has a long history of stock splits that dates back for nearly a century. Someone who owned a single share of 3M 100 years ago would have more than 3,000 shares of stock now because of all the times that 3M has split its shares.
Over the past 50 years, 3M stock has generated double-digit average annual total returns. Dividends have played some role in its performance, but much of 3M's value has come from share-price appreciation. The conglomerate has responded to regular rises in its share price with splits from time to time.
However, the exact share price level that has motivated 3M to do a stock split has changed over time. For instance, prior to the 1972 stock split, 3M stock had traded well above $100 per share for a long time, making the conglomerate unusual in choosing not to execute a split. 3M's move came when the stock approached the $160 level.
Subsequent moves in the 1980s and 1990s also came after the stock had been at triple-digit levels for a reasonable length of time. 3M's most recent split in 2003 made investors wait until the stock had climbed to between $140 and $150. Overall, this has given 3M a somewhat more conservative reputation in doing stock splits, but it also hasn't shied away from doing so when the stock not only reached certain levels but showed a strong likelihood of remaining there.
What's changed in 3M's stock split philosophy?
For the first time in decades, 3M hasn't used a similar philosophy in deciding when to do a stock split. Shares have soared in 2017, rising from $175 to more than $230 per share. Interestingly, 3M hasn't followed its previous playbook in considering a stock split in recent years. After the financial crisis, 3M shares hit the triple-digit mark in early 2013, and it went up to $150 per share by late 2014. The conglomerate, however, didn't make any moves to do a stock split, and a subsequent run to $180 per share still hasn't led to any serious discussion of a future move.
Sentiment toward splits throughout the market has shifted dramatically since 3M last made such a move. Companies are less uncomfortable with triple-digit share prices, and many companies have pushed well above the $200-per-share mark without even considering a stock split.
Yet some believe that 3M's status as a Dow component could lead to a future split. 3M's share price gives it an almost 7% weighting in the price-weighted average, or more than double what an equal-weight system would give the stock. 3M's market cap of just under $140 billion arguably shouldn't justify the top-4 Dow status that the conglomerate currently enjoys because of its high share price.
Should 3M investors expect a stock split?
The problem is that 3M isn't the only Dow component whose valuation has gotten out of sync with its size. Unless other Dow components act in unison to execute splits for the good of the average, 3M isn't likely to make a move independently. For now, 3M investors shouldn't expect 2018 to be different from any of the most recent 15 years before it.
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