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  • Writer's pictureRealFacts Editorial Team

3M Stock Surges Despite First Dividend Cut in Over Six Decades


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3M (MMM) has emerged as one of the top performers in the Dow this week, experiencing a 5% gain on Tuesday and a moderate increase on Wednesday. This positive momentum occurred despite the company's decision to cut its dividend to approximately 40% of adjusted free cash flow. This marks the first dividend cut by the company in 64 years which has led the company to be the third highest dividend paying company in the S&P 500. The stock outperformed the market despite the rate cut due to a better-than-expected earnings report. In the first quarter ending March 31, 3M reported a 0.5% year-over-year increase in revenue, reaching $7.7 billion. Earnings per share (EPS) also saw a significant rise, climbing 21.3% to $2.39. These results surpassed analysts' forecasts, who anticipated revenue of $7.1 billion and EPS of $1.96.

 

During Bloomberg Markets: The Close, Kiel Porter from Bloomberg News discussed the rationale behind 3M's decision to cut its dividend. He shared that the “company announced last year and completed this week the spinoff of its healthcare business, Solventum (SOLV).” A spinoff refers to the process of a company creating a new independent entity by separating a portion of its business or assets and distributing them to existing shareholders as shares in the new entity. 3M common stockholders were given one share of Solventum stock for every four shares of 3M common stock they owned. Porter noted that following the removal of Solventum, 3M simply couldn’t support the dividends they are known for providing. With more cash available to the company following the dividend cut, many investors are hopeful that 3M will return to its legacy of producing game-changing products.

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