A Super-Stock You Can Bank On?
The best companies have a tendency to remain just that—the best. But it is true that a business cycle exists, and this is the case for individual corporations economy-wide. As a stock market investor, many corporations have proven historically to be attractive buys when their share prices retreat. And that’s the key—getting the business cycle correct and investing in those corporations that are market leaders, even during recessions.
If you are saving for retirement or are retired and living on a fixed income, dividend income from the stock market likely plays a role in your life. Because interest rates are so artificially low right now, countless retirees have to have exposure to the stock market, even if they would prefer not to. The fact of the matter is that you can’t beat the rate of inflation with today’s interest rates. Nowadays, we have to get dividend income from corporations, which is a riskier investment strategy.
One of many blue chip corporations that are doing very well in this economy is 3M Company (NYSE/MMM). How do you describe this diversified company that makes tape, coatings, medical supplies, cleaning products, and electronic equipment? Well, it’s a company with a lot of interests, and in spite of what you hear in the news, business is pretty darn good. The company’s long-term stock chart is featured below:
Chart courtesy of www.StockCharts.com
Even among large-cap, blue chip corporations, 3M’s long-term track record on the stock market is outstanding. The stock has proven that it is worth buying when it’s down, which according to its chart, isn’t usually for long.
For any stock market portfolio, consistency of returns, dividend payments, and earnings are welcome. Even with a mix of smaller companies, you would not have gone wrong with a company like 3M as a component.
Right now, the U.S. economy is hardest on the unemployed, underemployed, and those workers with little in the way of skills or education. Skilled trade workers continue to be in demand, and there is work in the industrial economy.
For investors, a company like 3M illustrates the importance of having stability and income in a stock market portfolio. So many corporations experience extreme volatility in their business operations that it can make the ownership experience quite miserable for investors.
In its latest quarter, 3M just reported excellent financial results, and the stock jumped 10 full points on the news. We continue to hear about how bad things are in many parts of the U.S. economy, but for many corporations like 3M, business conditions are rock solid.
Wall Street analysts recently increased their earnings expectations for 3M for the next three quarters, fiscal year 2013, and fiscal year 2014. The stock is currently trading around 16-times its current earnings, with a dividend yield of approximately 2.5%.
Looking at corporations like 3M and their track records on the stock market, you might say that business is booming. What’s most important is that business is stable, and the company continues to increase its dividends. For