“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy emphasizes a long-term investment horizon, where a five-year holding period — or even longer — fits naturally into the strategy of buying high-quality businesses and letting compounding do the heavy lifting. For investors applying that philosophy to a diversified portfolio, individual positions such as 3M Co (NYSE: MMM) can be illustrative case studies in how total return is actually generated over time.
How would such a strategy have worked out for an investment into 3M made in early 2021 and held through early 2026, with dividends reinvested? Below, we examine the outcome of a hypothetical $10,000 investment in 3M Co over that period using a dividend reinvestment plan (DRIP) framework.
| Start date: | 04/05/2021 |
|
|||
| End date: | 04/01/2026 | ||||
| Start price/share: | $163.02 | ||||
| End price/share: | $145.25 | ||||
| Starting shares: | 61.34 | ||||
| Ending shares: | 73.52 | ||||
| Dividends reinvested/share: | $20.77 | ||||
| Total return: | 6.78% | ||||
| Average annual return: | 1.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,676.50 | ||||
As we can see, the five-year investment result worked out as follows, with an annualized rate of return of 1.32%. This would have turned a $10K investment made 5 years ago into $10,676.50 today (as of 04/01/2026). On a total return basis, that is a result of 6.78% over the full period. For context, long-run U.S. large-cap equities have historically delivered annualized returns in the high single digits, so this particular five-year stretch for 3M lagged a typical equity market cycle.
It is also worth noting that this period captured several significant headwinds for 3M shareholders, including elevated litigation and settlement costs related to earplugs and so-called “forever chemicals” (PFAS), supply chain disruptions around the COVID-19 pandemic, and strategic repositioning efforts, including portfolio rationalization and the spin-off of its healthcare business. These factors weighed on investor sentiment and on the company’s valuation multiple, even as 3M continued to return cash to shareholders via dividends.
On a total return basis, the numbers above incorporate both price change and the impact of dividends. The calculation presumes that dividends are automatically reinvested through a DRIP and that fractional shares are accumulated over time. This approach mirrors what a long-term income-oriented investor might do in practice. [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
How Dividends Drove the Bulk of the Return
Beyond share price change, another component of MMM’s total return these past 5 years has been the payment by 3M Co of $20.77/share in dividends to shareholders. Automatic reinvestment of dividends can be a powerful way to compound returns, especially for mature industrial companies that tend to grow more slowly but distribute a larger share of free cash flow.
In this example, the investor’s share count increased from 61.34 to 73.52 over the period, entirely due to dividend reinvestment. That growth in shares outstanding — an increase of roughly 20% — provided an offset to the modest 10.9% decline in the stock price from $163.02 to $145.25. Without the contribution from dividends and their reinvestment, the overall result would have been negative over the five years.
For the above calculations, we presume that dividends are reinvested into additional shares of stock and that the closing price on the ex-dividend date is used as the reinvestment price. This convention is standard for DRIP return calculations and highlights the extent to which income and reinvestment can reshape the total return profile, even in periods when the headline share price appears disappointing.
Current Yield Versus Yield on Cost
Based upon the most recent annualized dividend rate of 3.12/share, we calculate that MMM has a current yield of approximately 2.15%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.12 against the original $163.02/share purchase price. This works out to a yield on cost of 1.32%.
While yield on cost is often used by long-term investors as an intuitive measure of income growth relative to their original outlay, it is not directly comparable across securities at a single point in time because it anchors to historical purchase prices. By contrast, current dividend yield can be compared across potential new investments and therefore is more relevant for capital allocation decisions today.
For an investor following a Buffett-style buy-and-hold approach, the evolution of yield on cost can still be instructive. In cases where dividends are increased consistently over many years, yield on cost can become substantial. In 3M’s case, however, recent dividend growth has been modest, reflecting the company’s focus on balance sheet strength, legal obligations, and strategic repositioning rather than aggressive payout expansion.
What This 5-Year Window Says About Risk and Reward
From the perspective of a long-term, fundamentally oriented investor, the 6.78% cumulative return over five years is a reminder that even well-established blue-chip names can deliver muted results over intermediate horizons. Business quality, dividend history, and brand strength do not insulate a stock from valuation compression, cyclical swings in demand, or company-specific legal and regulatory risks.
For investors evaluating MMM today, several analytical angles may be relevant:
- Balance sheet and litigation profile: The scale and timing of litigation payments and settlements can influence leverage, credit metrics, and capital return policies.
- Dividend sustainability: Coverage of the dividend by free cash flow and earnings remains central for income-focused investors, particularly after a period of elevated legal and restructuring costs.
- Cyclicality and end-market mix: As a diversified industrial, 3M is exposed to global industrial production, healthcare, electronics, and consumer demand, each with its own cyclical drivers.
- Valuation: After several years of underperformance, prospective returns will depend in part on whether earnings stabilize and whether the market assigns a higher or lower multiple relative to industrial peers.
From a portfolio-construction standpoint, the experience of a 1.32% annualized return over this period can also be viewed against alternatives. U.S. Treasury yields, investment-grade corporate bonds, and broad equity indices all offered different risk-return profiles during 2021–2026. A disciplined investor might use this type of backward-looking attribution to refine assumptions about future expected returns and appropriate position sizing, rather than to draw simple conclusions about past winners and losers.
Ultimately, the key question for prospective and existing shareholders is forward-looking: how might MMM shares perform over the next five years, given the company’s current valuation, risk profile, and strategic trajectory?
Framing 3M Within a Long-Term Discipline
The 2021–2026 period for 3M underscores that even for durable franchises, returns can be dominated by non-fundamental events over multi-year stretches. For investors who anchor on long-term compounding, episodes like this can be catalysts to revisit, rather than abandon, basic disciplines: diversification, valuation awareness, and a clear understanding of balance sheet and legal risks.
Another great investment quote to think about:
“The individual investor should act consistently as an investor and not as a speculator.” — Benjamin Graham
Viewed through that Graham-and-Buffett lens, the past five years in MMM are a case study in the distinction between business performance, stock performance, and investor behavior. While the backward-looking numbers are modest, the more important exercise is to assess whether today’s price, dividend, and risk profile justify a long-term position size within a diversified equity portfolio.
