Is 3M Stock a Buy?
The case for buying 3M (NYSE: MMM) is a value-investing one. In a nutshell, you aren't buying 3M for what it is now, but rather for what it could become if CEO Mike Roman's restructuring begins to generate operational improvements and its end markets start to improve. Furthermore, you will earn a 3.4% dividend yield while you wait for the improvements to take shape. As such, 3M is attractively priced on a risk/reward basis. Here's why.
Image source: Getty Images.
One of the most popular ways to value a mature industrial conglomerate stock is to look at its free cash flow (FCF) yield. In plain English, this is the FCF divided by market cap, so a higher number is better. FCF is important as it's the flow of cash in a year that a company has free in order to pay down debt, make share buybacks, and pay in dividends. Theoretically, at least, a company could pay all of its FCF in dividend, but in reality most companies aim to pay a share of their FCF in dividends.
Source Fool.com
