Why 3M’s Dividend Yield Is on the Rise
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. Higher dividend yields along with good growth attract long-term investors.
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As of May 15, 3M’s (MMM) dividend yield stood at ~2.7%, the highest it has been since the fourth quarter of 2015. 3M’s dividend yield has shown signs of improvement since it increased its dividend in the first quarter of 2018. Peer General Electric (GE) has a better dividend yield of 3.4%, while Honeywell (HON) and Stanley Black and Decker (SWK) have dividend yields of 2.0% and 1.75%, respectively, which is lower than 3M’s yield. The current dividend yield is still higher than the yields from the one-year Treasury bonds.
Why is 3M’s dividend yield on the rise?
The primary reason for the increase in 3M’s dividend yield is the increase in the dividend rate. The second reason is the decline in its stock price. 3M’s stock price since its first-quarter earnings, which were announced on April 24, has fallen by 6.4%. The earlier dividend yield trend suggests that 3M’s dividend yield declined primarily because of an increase in stock prices. The other thing to note is that whenever dividends have fallen, the increase in 3M’s dividend rate has helped to improve the dividend yields.
Investors can indirectly invest in 3M by investing in the Dow Jones Industrial Average ETF (DIA), which invests 5.7% of its holdings in 3M as of May 15.
In the next part, we’ll look into 3M’s second quarter dividend, dividend growth, and its ability to sustain the dividend growth.