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TheStreet Open House

3M's Dividend Has Investors Sticking With the Company

NEW YORK (TheStreet) -- If you're going to invest in a good dividend stock, you want it to have surging cash flows. So consider 3M (MMM - Get Report).

3M -- the maker of the familiar Scotch tape and Post-It notes -- has operations in more than 65 countries. 3M is among the top 30 companies on the Dow Jones Industrial Average. The firm has paid dividends consistently for close to a century now. At around $141, shares are up a fraction for the year to date but up 19% for the past 52 weeks.

Read More: Warren Buffett's Portfolio Proves He's a Dividend Growth Investor

In addition, the company has steadily increased its dividend payout for 56 years in a row, an impressive achievement that places 3M among "aristocrats" such as Coca-Cola (KO). 3M's dividend payout continues to rise with dividend yield in close proximity of the industry average. The yield has picked up in 2014 after experiencing a drop in the last fiscal year and has risen from 1.81% to 2.1%.

Analysts are anticipating the dividends to rise to 8.5% in the current fiscal year. Quarterly dividend of 85.5 cents per share has already been announced by the management this past May, an annual increase of 5% for full-year dividends.

Operational cash flow has been rising steadily primarily due to effective management of net working capital and a spike in net income. The company currently boasts a cash flow of about $6 billion.

3M dedicates approximately 30%-32% of its cash flow to dividend payments. In the 2013 fiscal, the company's dividend payouts stood at $1.76 billion, which is a 6% year over year increase. The conglomerate's sales netted the company $8.1 billion in the second quarter of the current fiscal, which is a profit of $1.27 billion, or $1.91 per share, up from $1.20 billion or $1.71 a share year over year. The company converted 103% of the $1.3 billion in net income to free cash flow during the quarter.

3M currently enjoys a low debt-to-equity ratio of 0.35, which represents a low risk profile when compared to the industry standard of 0.9. This also indicates that 3M is strategically prepared to manage interest changes for both long-term and current liabilities. The firm's current debt-to-equity ratio is 37.2% lower than the diversified machinery sector and approximately 51% lower than the industrial goods sector.

Read More: 5 Stocks Ready for Breakouts

3M's Electronics and Energy revenue have jumped by 6.4%, which it makes it the most rapidly expanding sector within the corporation. The Health Care and Consumer segments have grown by 5.1% and 4.2%, respectively. Operating income grew collectively across the board by 5.8%.

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