Shares of 3M (MMM -0.53%) are down by more than 15% since the start of the year, vastly underperforming the S&P 500, which has climbed nearly 16%. Take this in concert with 3M stock's 32% decline in 2022, and it's clear that it hasn't provided much joy for investors recently.

Smart investors know that for an industrial sector stalwart like 3M, a dip can provide a great opportunity to scoop up shares on the cheap. But whether this stock is headed for gains or not is up for debate, so let's see how two fool.com contributors break down the bear and bull arguments for 3M.

It could be one step forward and two steps back for 3M in 2023

Lee Samaha: This industrial giant's hefty dividend yield is enticing, but there's no such thing as a risk-free dividend. Moreover, the risks facing 3M appear to be near, medium, and possibly long term. 

In the near term, 3M faces challenges merely to meet its full-year guidance. For example, management has already told investors it's tracking toward the low end of its organic sales growth guidance range, implying something near a 3% decline in 2023. That news came in July, and since then, China's economic recovery has turned out weaker than expected, and other companies have reported weakness in key end markets for 3M such as smartphones, semiconductors, and automotive production. 

Over the medium term, despite some positive news over its legal cases involving water contaminated with PFASs (aka, "forever chemicals") and problems with earplugs it sold to the U.S. military, it's far from clear whether those issues have been fully resolved. 3M may face further lawsuits, which could threaten its ability to sustain its dividend. 

MMM Gross Profit Margin Chart

MMM Gross Profit Margin data by YCharts.

In the long term, 3M needs to address the issue of its declining profit margins before investors can feel entirely comfortable buying the stock. 

The company's business model relies on research and development to generate differentiated products that command good prices and lead to volume increases that drive margin expansion. As such, its decline in gross margin is a genuine concern because it implies that 3M is losing pricing power, which will eat away at its ability to grow profits. Something to consider before buying the stock.

Things are looking up for 3M

Scott Levine: With its juicy dividend that yields 6.1% at the current share price, it's no surprise that investors are wondering if this ticker belongs in their portfolios. But it's not only the high yield that makes 3M stock attractive. Management's judicious approach to rewarding shareholders should also be appealing, and allay concerns that those payouts are coming at the cost of the company's financial health. Over the past 10 years, 3M has averaged a conservative payout ratio of 56%, providing a green flag for the high-yielding dividend.

In terms of the company's recent performance, it's certainly important to note the strain that China's economic situation has placed on 3M's financials. Similarly, the company's organic growth is also a concern worth acknowledging. But these factors haven't precluded management from raising its adjusted earnings forecast for 2023. Thanks to the restructuring plan that 3M implemented this year, the company expects 2023's results to be better than previously thought. Whereas management had originally forecast 2023 adjusted earnings per share (EPS) of $8.50 to $9.00, on the second-quarter conference call, management discussed the lifting of this guidance range to $8.60 to $9.10.

Although 3M has suffered from declining profit margins over the past two years, it's important to recognize its recent success in expanding its gross margin on a quarter-over-quarter basis in the second quarter. Granted, it was a small step, but it was a step nonetheless, and suggests that the company's restructuring efforts are having a positive effect. Moreover, if the company meets its adjusted EPS 2023 guidance, that will suggest that the headwinds that have challenged the company over the past two years may be waning.

Is now the time to buy 3M stock?

Although there are a variety of opinions on 3M stock, it's important for investors to remember that everyone's situation is different. For those who are interested in reducing their risk exposure, it would be more reasonable to take a wait-and-see approach. Those who prefer a more aggressive approach, however, should feel reassured by management's recently updated earnings guidance, and the fact that they can pick up shares of 3M on the cheap right now. The stock is trading at 9 times operating cash flow, a discount to its five-year average cash flow multiple of 13.3.