3M Stock Has Secure Dividends and Ample Cash Flow

Despite what critics have said of late, 3M (NYSE:MMM) is actually a very solid and safe company for investors. MMM stock has at least 45% upside from current prices based on its dividend-paying track record and solid cash flow. The company has been in the news lately due to its production of masks and other products used to fight the novel coronavirus. The company faced criticism from the President and others for exporting some of its N95 respirator masks.

Value investors have learned to catch stock bargains when a company has trouble that is temporary in nature. MMM stock really seems to be in one of those temporary binds. For example, last year 3M generated $7.07 billion in cash flow from operations (CFFO). It spent just $1.7 billion in capex. So its free cash flow, available to be spent on dividends, was $5.37 billion. But here’s the thing. 3M’s dividend, currently at $5.88 per share (dividend yield is 4%), costs the company just $3.32 billion annually. So the company, based on last year’s cash flow, can absorb a big hit to earnings and still afford the dividend. In fact, CFFO would have to fall by as much as $2 billion, or 38% before the dividend literally could not be covered by existing FCF.

Source: InvestorPlace

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