A Dividend Cut Will Make 3M a Buy

The subject of 3M's (NYSE: MMM) dividend came up again during a industrial conference where 3M's management team fell short of strongly affirming it would maintain it at current levels. As such, I thought I'd share some thoughts on the issue and lay out some numbers so readers can make up their minds.

Citigroup analyst Andrew Kaplowitz asked 3M management if it had any thoughts on the dividend in light of the release of a Form 10 SEC filing related to the upcoming spinoff of the healthcare business Solventum. As a reminder, Solventum is a cash-generative and relatively stable business, particularly when compared to 3M's remaining three segments, which tend to be more cyclical and rely on the economy. It's also the only segment to report sales growth last year.

3M CEO Mike Roman's reply reiterated the company's financial strength and cash-flow potential (more on that in a moment) and referred to a capital allocation policy that "means investing in the business" and "continues to be the priority." The remaining company would in a position to meet litigation matters and "to return cash to shareholders and value to shareholders including through a dividend, paying an attractive dividend."

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Source Fool.com