3M Adds Pressure On GE Dividend Situation (MMM, GE)

3M Co. (NYSE: MMM) just did the opposite of what many large companies are doing in the current liquidity-crunched environment.  The conglomerate just raised its dividend to $0.51 per share.  We have been commenting how General Electric Co. (NYSE: GE) needs to cut its dividend, so it is important to see how these two compare.

For starters 3M’s dividend hike is only 2%, or just a penny, to $0.51 per share for the first quarter of 2009.  It may be a small hike and GE’s hike was last last year.  But 3M’s move is still a hike.

3M’s $2.04 annualized dividend yields 3.99% based on a $51.08 close.  3M is also close to its 52-week low, but its shares are down 38% from its 52-week high.  GE’s dividend is yielding north of 11% based upon an $11.62 price, but while it is also close to 52-week lows its stock is off by some 70% from those highs.  Those numbers are even worse if you take the 18-month high.

George Buckley, 3M chairman, president and CEO, is probably trying to signal that it is very stable in this crazy environment.

This marks the company’s 370th consecutive quarterly dividend and the 51st consecutive year of 3M dividend increases.  GE had been on much of the same path.  It technically still is not off that path.  But we still think because of the double-digit yield at current prices and because of its “AAA” rating goal and other fiscally-environmental reasons that GE will cut it by half.  After all, GE could save $5 billion per year if it cut the dividend like that.

Buckley did note that it is prudent to take a conservative approach to 3M’s dividend increase as a way to maintain a strong cash position.  While it is extending its buyback with an indefinite date, the company noted that share repurchase activity has been suspended.  GE has also been out of the share buyback game since last year.

Even if GE cut the dividend by half of by one-third, it would still be one of the highest yielding DJIA components.

Jon C. Ogg
February 10, 2009