A venerable company's share price is down, driving up the dividend and perhaps creating an opportunity
For more than a year and a half, the share price of the 3M
Company (NYSE:MMM) has trended downward.
Most recently, it was part of the spring market meltdown,
from which it rebounded to some extent. As Chairman and CEO Mike Roman noted in
the second-quarter earnings release on July 28th, "our results were
significantly impacted by the global economic slowdown."
3M also has been wrestling with liabilities from the past,
primarily around PFAS, or perfluoroalkyl and polyfluoroalkyl substances. Thus,
it reported significant legal liabilities, including more than $600 million
paid out in the first half of 2020. In its 10-K for 2019, the company recorded
a pre-tax charge of $897 million related to PFAS liabilities.
The demand for masks and other personal protective equipment
has been a bright note fpr the company, but second-quarter results were mixed.
Sales and earnings per share were down from the same period last year, but
operating cash flow and adjusted free cash flow were both up. More important,
perhaps, was the news that monthly sales numbers were improving, albeit slowly.
3M continues to withhold guidance for the full year.
With the share price relatively low, is 3M a stock that
deserves investor attention, or is it a value trap? In this article, we will
attempt to assess this by studying 3M's fundamentals, dividends, buybacks and
guru investors.
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