This is Why 3M (MMM) is a Great Dividend Stock
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does 3M (MMM) have what it takes? L...
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
3M in Focus
3M (MMM) is headquartered in St Paul, and is in the Conglomerates sector. The stock has seen a price change of 11.5% since the start of the year. Currently paying a dividend of $1.48 per share, the company has a dividend yield of 3.04%. In comparison, the Diversified Operations industry's yield is 0.28%, while the S&P 500's yield is 1.37%.
Taking a look at the company's dividend growth, its current annualized dividend of $5.92 is up 0.7% from last year. Over the last 5 years, 3M has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.85%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, 3M's payout ratio is 58%, which means it paid out 58% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, MMM expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $10.11 per share, with earnings expected to increase 15.68% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, MMM is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
Tech IPOs With Massive Profit Potential: Last years top IPOs surged as much as 299% within the first two months. With record amounts of cash flooding into IPOs and a record-setting stock market, this year could be even more lucrative.See Zacks’ Hottest Tech IPOs Now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
3M Company (MMM): Free Stock Analysis Report
To read this article on Zacks.com click here.