3M vs. United Parcel Service: One of These Industrial Stocks Is a Much Better Buy Right Now

3M (NYSE: MMM) and United Parcel Service (NYSE: UPS) do completely different things: one is a manufacturer, and the other a provider of delivery services. However, both are iconic businesses facing material headwinds. And one of them looks a lot more interesting as an investment right now, particularly if you are a dividend investor.

3M's problems are real and uncertain

3M has been through a difficult transition. After a period of sluggish growth, the industrial conglomerate chose to slim down and refocus. The biggest move was the spin-off of its healthcare business into Solventum (NYSE: SOLV). That was the company's crown jewel, and without this business, 3M won't be able to grow as quickly.

Image source: Getty Images.

This move brings up the larger problem. 3M has been facing material legal liabilities, including class action lawsuits related to forever chemicals (PFAS) and earplugs sold to the military. The company needed the cash it raised from the spin-off to ensure it could work through its legal issues. However, the legal issues aren't over yet, so there remains a material and uncertain overhang on the business. And yet the stock's price-to-sales, price-to-earnings, and price-to-book ratios are all notably above their five-year averages.

3M had a solid 2025, with organic sales up 2.1% and earnings up 10%. The valuation reflects that strong performance, but it doesn't appear to recognize the still material and uncertain legal risks.

UPS is slowly turning the ship

By comparison, UPS looks cheap. Its P/S, P/E, and P/B ratios are all below their five-year averages. And while UPS is facing its own challenges, they aren't of the legal variety. So investors can more closely monitor what is going on and don't have to worry about big surprises, like the loss of a material court case. The big problem with UPS is a turnaround effort aimed at slimming down and refocusing the business on growth.

In this case, the turnaround has required material upfront costs (capital investments in new equipment) even as the effort reduced revenues (shifting away from high-volume customers that aren't very profitable to serve). That's led to a period of weak financial performance. However, there are signs of improvement, with revenue per piece in the U.S. market rising. And the company believes that 2026 will be the inflection point in the turnaround effort.

Go with the higher yield, cheaper stock

Neither 3M nor UPS is a risk-free investment given their current headwinds. But 3M's legal problems are harder to quantify, the stock looks expensive, and it only offers a 2% dividend yield. UPS, on the other hand, appears to be making progress on its turnaround, has a far more attractive valuation, and a 6.3% yield. For most, and particularly for dividend investors, UPS is probably the better option.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends 3M and United Parcel Service. The Motley Fool recommends Solventum. The Motley Fool has a disclosure policy.