How much is the dividend on 3M stock?

Although some time has passed 3M (hmm 0.38%) It recently officially cut its dividend, authorizing a dividend of $0.70 for the second quarter, up from the previous quarterly payout of $1.51. Annualizing the dividend would mean $2.80 per share for the full year, or a dividend yield of 2.8% using Wednesday’s closing price.

3M cuts dividend

It’s been no secret that 3M will be cutting its dividend, as management has told investors it plans to pay out 40% of its adjusted free cash flow (FCF) as dividends this year. So investors already know that the dividend-to-FCF ratio is 40%.

Regarding the dividend-to-earnings ratio, management expects earnings per share to be between $6.80 and $7.30 (excluding currently spun-off operations). solvent), which implies a dividend payout ratio of 40% to net income at the midpoint of guidance.

This ratio may seem to give 3M room to increase its dividend, but remember that there are billions of dollars and multi-year legal settlements to pay, and the “new” 3M is a fundamentally cyclical business. It is no longer attached.

Speaking of Solventum, it’s worth noting that 3M left the company in debt. The immediate priority is paying down debt, which means no dividends to shareholders for the time being.

Could 3M increase its dividend?

If management pays out 40% of FCF in dividends, 3M can also increase its dividend as FCF increases. That said, some caution is required. As previously mentioned, a multi-year legal settlement is required, and 3M’s revenue growth and margin performance have been poor over the past decade.

There is a good case for buying stocks as a value play. Nonetheless, this is not based on dividends, but on the possibility that new CEO Willam Brown will add strategic vision to a restructuring plan that appears to already be underway.