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Why 3M (MMM) is a Top Dividend Stock for Your Portfolio
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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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
3M in Focus
3M (MMM - Free Report) is headquartered in St Paul, and is in the Conglomerates sector. The stock has seen a price change of 14.17% since the start of the year. Currently paying a dividend of $1.48 per share, the company has a dividend yield of 2.97%. In comparison, the Diversified Operations industry's yield is 0.29%, while the S&P 500's yield is 1.36%.
Taking a look at the company's dividend growth, its current annualized dividend of $5.92 is up 0.7% from last year. 3M has increased its dividend 5 times on a year-over-year basis over the last 5 years 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. 3M's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
MMM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $10.11 per share, with earnings expected to increase 15.68% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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).
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Why 3M (MMM) is a Top Dividend Stock for Your Portfolio
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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
3M in Focus
3M (MMM - Free Report) is headquartered in St Paul, and is in the Conglomerates sector. The stock has seen a price change of 14.17% since the start of the year. Currently paying a dividend of $1.48 per share, the company has a dividend yield of 2.97%. In comparison, the Diversified Operations industry's yield is 0.29%, while the S&P 500's yield is 1.36%.
Taking a look at the company's dividend growth, its current annualized dividend of $5.92 is up 0.7% from last year. 3M has increased its dividend 5 times on a year-over-year basis over the last 5 years 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. 3M's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
MMM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $10.11 per share, with earnings expected to increase 15.68% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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).