3M Stocks – 3M Company (NYSE:MMM) Will Pay A US$1.48 Dividend In Four Days

Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that 3M Company (NYSE:MMM) is about to go ex-dividend in just four days. Investors can purchase shares before the 11th of February in order to be eligible for this dividend, which will be paid on the 12th of March.

3M’s next dividend payment will be US$1.48 per share, and in the last 12 months, the company paid a total of US$5.92 per share. Based on the last year’s worth of payments, 3M stock has a trailing yield of around 3.3% on the current share price of $179.01. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether 3M has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for 3M

If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. 3M is paying out an acceptable 63% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 51% of its free cash flow as dividends, within the usual range for most companies.

It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we’re encouraged by the steady growth at 3M, with earnings per share up 3.8% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company’s prospects for future growth.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, 3M has increased its dividend at approximately 11% a year on average. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is 3M worth buying for its dividend? Earnings per share have been growing modestly and 3M paid out a bit over half of its earnings and free cash flow last year. In summary, it’s hard to get excited about 3M from a dividend perspective.

So if you want to do more digging on 3M, you’ll find it worthwhile knowing the risks that this stock faces. In terms of investment risks, we’ve identified 2 warning signs with 3M and understanding them should be part of your investment process.

We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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