Why 3M Stock Is Rising Even as Its Dividend Hike Era Ends

By
Bill McColl
Bill McColl
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Bill McColl has 25+ years of experience as a senior producer and writer for TV, radio, and digital media leading teams of anchors, reporters, and editors in creating news broadcasts, covering some of the most notable news stories of the time.

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Published April 30, 2024
3M

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Key Takeaways

  • 3M exceeded estimates for profit and sales in the first quarter while saying that its spinoff of health care unit Solventum means it won't be increasing its dividend.
  • The multinational conglomerate said its dividend would now be based on its free cash flow, which is expected to lower the amount of payouts after six decades of annual increases.
  • Despite that, shares of 3M rose to their highest level in more than a year on its streamlining efforts.

Shares of 3M (MMM) climbed as the streamlined multinational conglomerate reported better-than-anticipated results, even as the spin-off of its healthcare unit led to the end of its days as a dividend aristocrat.

The maker of Post-it notes and Scotch tape posted first-quarter earnings per share (EPS) of $2.39, with revenue down 0.3% to $8.0 billion. The results, which exceeded forecasts, showed the company's efforts to streamline by spinning off its health care unit Solventum (SOLV) paid off.

3M said it retained 19.9% in Solventum, which was listed in New York at the start of the month, and plans to monetize that stake within five years.

Outgoing CEO Mike Roman also accredited the company's performance to "finalized legal settlements.” Those settlements involved class-action lawsuits over so-called “forever chemicals” in military earplugs. 

The results also mark the end of 3M's six-decade-long history of raising its dividend each year. The company announced a quarterly dividend of $1.51 per share. 

The company said Tuesday its annual payout ratio “is expected to be approximately 40% of adjusted free cash flow with potential to increase over time.” Roman noted executives will seek board approval for the dividend next month, with the payout set for June. He also said the company would launch share buybacks.

3M shares were up 2.5% higher at $94.42 as of about 1:30 p.m. ET.

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  1. 3M. "2024 First Quarter Earnings."

  2. 3M. "3M First-Quarter Results Driven by Strong Operational Performance; Company Initiates Full-Year 2024 Guidance Reflecting Completion of Solventum Spin."

  3. 3M. "Q1 2024 Earnings Call Transcript."

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