Is It Safe? 3M's Steady, But Not Sexy

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When businesses and consumers cut spending during a recession, industrial companies feel the pain more than most. As demand grinds to a halt, investors tend to dump their shares.

3M(MMM Quote), however, has weathered the weak economy better than its peers. The St. Paul, Minnesota-based company's shares have dropped 17% in the past year, less than the 33% decline for the industrial sector.

3M produces goods people take for granted, such as stethoscopes, traffic signs and tape. The firm operates in fields as varied as health care, security and optics. It caters to consumers and companies at every price. While this diversification has limited growth, the strategy has helped 3M avoid the volatility that's plaguing its competitors.

In the past 10 years, 3M shares have returned 5.7% a year, on average, as the overall industry stayed flat. The company's lower risk can be seen in its adjusted beta value, a measure of volatility, of 0.88. It's the kind of stock that can help balance portfolio swings.

The downside of reduced volatility is lagging performance when markets are bullish. This quarter, 3M has risen 21% while the industry has risen 26%. Among members of the Dow Jones Industrial Average, 3M ranks in the middle for stock performance in most time periods.

Missing the juicer gains is the price investors must pay for predictable stock movement. Still, with a dividend yield of 3.4%, 3M isn't a sleepy stock either.

3M posted a return on equity of 32% in past 12 months, more than doubling the sector's return of 15.5%. The company's price-to-earnings ratio suggests it's slightly undervalued, with a ratio of 15.5 versus 16.3 for the industry.