3M has now settled the most significant of the lawsuits related to some of its vast product range. It’s also stopping production of the chemicals in question in 2025.
In the meantime, the company remains on solid ground financially while the stock trades at just 9.7 times the company’s 2023 earnings forecast.
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3M COMPANY (New York symbol MMM; www.3m.com) produces more than 60,000 items, including air purifiers, adhesives, bandages and components for medical devices. Its main brands include Post-it notes, Scotch tape, Scotch-Brite cleaning products, Scotchguard protection and Thinsulate insulation.
3M plans to spin off its Health Care division as a separate company in the first half of 2024. That business makes products that treat and prevent infections in wounds, dental filling materials, and filtration and purification products. It supplies 25% of 3M’s sales. The company will continue to own 19.9% of the Health Care business, but expects to sell that stake over time.
The company has agreed to settle lawsuits related to the release of polyfluoroalkyl substances (PFAS) from its operations in several U.S. cities. PFAS chemicals resist heat, oil, stains and water and are used in a number of products. The U.S. Center for Disease Control recognizes that exposure to high levels of PFAS may impact the immune system. 3M plans to stop producing PFAS in 2025.
Dividend Stocks: 3M’s Risk is now reduced with the payout remaining high
As a result, 3M will pay a total of $10.3 billion over the next 13 years.
The company has also agreed to settle claims regarding defects in earplugs it manufactured for the U.S. Army. The lawsuits allege that the earplugs caused hearing loss in combat soldiers.
3M will pay a total of $6.0 billion, consisting of $5.0 billion in cash and $1.0 billion in common shares, between 2023 and 2029.
These settlements help cut 3M’s long-term risk, and help protect the dividend. Based on the current rate of $6.00 a share, which yields a high 6.8%, the company’s annual dividend payments total roughly $3.3 billion.
With the March 2023 payment, 3M raised your quarterly dividend 0.7%. The firm has paid dividends continuously for over 100 years and has increased that rate each year for the past 65 years. Including the latest raise, 3M has increased its annual dividend rate by an average 2.0% in the past 5 years. Its TSI Dividend Sustainability Rating is Above Average.
Recommendation in Wall Street Stock Forecaster: 3M Company is a buy for long-term gains.