Why Did 3M’s Dividend Yield Increase?



3M’s dividend yield

The dividend yield is what investors get in return for every dollar they invest in a company’s equity during their holding period. Long-term investors, apart from looking for capital gains, prefer stocks with a high dividend yield and high dividend growth. A higher dividend yield and higher dividend growth provide investors with a steady income.

As of March 7, 2018, 3M’s dividend yield was at 2.30%—the highest in the past three quarters. The dividend yield growth shows that the sliding trend stopped. If the stock price starts to move up, the yield could come down again. General Electric (GE), Honeywell (HON), and Stanley Black & Decker (SWK) have dividend yields of 3.3%, 2.0%, and 1.7%, respectively. With the exception of General Electric, 3M’s dividend yield is higher than its peers. 3MM could become an alternative investment option for investors. 3M’s dividend yield is higher than the yields generated from one-year Treasury bonds.

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Why did 3M’s dividend yield increase?

The current dividend yield increased mainly due to an increase in the dividend rate. At the same time, 3M’s stock price also declined. 3M’s stock price is trading ~9.0% below its high of $258.63 as of January 26, 2018. The trend from 2012 to 2015 indicates that the dividend yield fell due to an increase in the stock price. However, the yield recovered due to an increase in the dividend rate. Since 2015, the growth in the stock price has outpaced the growth in the dividend rate. As a result, the dividend yield fell. Due to the dividend rate increase and lower stock price, the yields are looking up again.

Investors looking for exposure to 3M could invest in the Industrial Select Sector SPDR ETF (XLI). XLI has invested 5.7% of its portfolio in 3M as of March 7, 2018.

Next, we’ll discuss analysts’ views on 3M.


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