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3M Company has announced that it is giving twin rewards in forms of share buyback authorization and quarterly dividend to its shareholders. These rewards, approved by the board of directors, have aided the company’s share price to gain 0.7% yesterday.
We believe that such disbursements reflect 3M’s shareholder-friendly policies and strong cash position.
Details of Share Buyback & Quarterly Dividend
Under the new buyback program, 3M was allowed to repurchase shares of up to $10 billion. This program will replace the company’s existing share buyback programs.
Additionally, the company declared that it has been authorized to pay a quarterly cash dividend of $1.36 per share to shareholders of record as of Nov 23. The payment, pertaining to the fourth quarter of 2018, will be made this year on Dec 12.
Sound Capital-Allocation Strategies
3M uses free resources for strengthening its growth prospects and rewarding shareholders through share buybacks, and dividend payments.
Over the last five years (2013-2017), 3M’s annual dividend payments increased from $2.54 in 2013 to $4.70 in 2017. In the first three quarters of 2018, the company distributed a dividend of $4.08 per share. It’s worth noting here that the quarterly dividend rate was hiked by 16% in January 2018.
Regarding share buybacks, the company repurchased $3.6 billion worth of shares in the first three quarters of 2018. It had $1.5 billion authorization left in its $10-billion buyback program approved in February 2016.
For 2018, 3M anticipates repurchasing shares worth $4-$5 billion.
We believe that improvement in profitability and strong cash position will enable 3M to return higher value to shareholders in the years ahead. In the third quarter of 2018, the company’s net income increased 8% year over year. Further, its cash and cash equivalents were $3,185 million exiting the period.
For 2018, 3M now anticipates earnings of $9.90-$10.00 per share, with the mid-point reflecting year-over-year growth of 8.5%.
Zacks Rank & Stocks to Consider
With a market capitalization of $115.5 billion, 3M currently carries a Zacks Rank #3 (Hold). Solid product offerings, expanding geographical footprints and restructuring initiatives will benefit the company. However, inflation in input prices and high-interest expenses remain major concerns.
In the past three months, the company’s share price has decreased 1.5% compared with 9% decline recorded by the industry.
Moreover, the company’s Zacks Consensus Estimate for earnings per share declined 3.1% to $10.02 for 2018 and 3.2% to $10.89 for 2019.
3M Company Price and Consensus
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