3M’s Dividend Yield on a (Slow) Sliding Path
3M’s dividend yield
Long-term investors, apart from looking for capital gains, tend to prefer stocks with good dividend yields and growth. A dividend yield is what investors get in return for every dollar they invest in a company’s equity.
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As of December 6, 2017, 3M’s (MMM) dividend yield was ~2%, the lowest in the past four years. Peers General Electric (GE), Honeywell (HON), and Stanley Black & Decker (SWK) have dividend yields of 4.8%, 1.8%, and 1.4%, respectively. With the exception of GE, MMM’s dividend yield is higher than its peers. Its dividend yield is also better than the yield from one-year Treasury bonds.
Why MMM’s dividend yield is falling
From 2012 to 2015, 3M’s dividend yield trend indicates that whenever its dividend yield has fallen, primarily due to a rise in the stock, the increase in the dividend has helped dividend yields rise again. Since 4Q15, MMM stock has risen 71% compared to a dividend growth of 14.7%. As a result, the company’s dividend yield has been slowly trending downward. 3M generally increases its dividend in the first quarter and sometimes increases it again in the next quarter, which could help prevent the dividend slide.
Investors looking for exposure to 3M can invest in the Industrial Select Sector SPDR ETF (XLI), which has invested 4.5% of its portfolio in MMM as of December 6, 2017.
In the next part, we’ll look at analysts’ views on 3M.