3M Stock Is Higher Despite Its Dividend Cut. Here's Why

Core Viewpoint - 3M's stock rose nearly 4%, becoming the best performer in the Dow Jones, driven by better-than-expected first-quarter earnings and revenue despite a dividend cut ending a 64-year streak of increases [1][4]. Financial Performance - For the first quarter ended March 31, 3M reported a revenue increase of 0.5% year-over-year to $7.7 billion and earnings per share (EPS) rose 21.3% to $2.39, surpassing analysts' expectations of $7.1 billion in revenue and $1.96 in EPS [1][4]. Leadership Changes - The quarterly results were the last for outgoing CEO Mike Roman, who will be succeeded by William Brown, former CEO of L3Harris Technologies, on May 1 [3]. Dividend Cut - 3M announced a dividend cut following the spinoff of its healthcare business, Solventum, which was completed on April 1. The company will reset its dividend payout ratio to approximately 40% of adjusted free cash flow, leading to a significant reduction in shareholder payouts [4][5]. - The anticipated annual dividend of $2.85 per share represents a 52.8% reduction from the current annual rate of $6.04 per share [5]. Dividend Aristocrat Status - The dividend cut risks 3M's status as a Dividend Aristocrat, having raised its annual dividend for 64 consecutive years and paid dividends for the past 100 years [6]. Analyst Sentiment - Analysts have mixed views on 3M, with a consensus target price of $100.12, indicating an implied upside of just over 5% from current levels, and a consensus recommendation of Hold [7].