3M Had GE Dividend Envy After All: A 2014 Surprise

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3M Co. (NYSE: MMM) is rallying after the company affirmed its long-term revenue and earnings growth targets, as well as offered its 2014 goals. More importantly, 3M seems to have taken our advice on trying to trump General Electric Co. (NYSE: GE) with a rather ambitious dividend hike. We think the dividends will be the key focus for the news reactions this morning.

The dividend hike from 3M was by a sharp 35%, up to $0.855 per quarter per common share. That puts the annual payout at $3.42 per share. 3M’s guidance is for earnings to be in the range of $7.30 to $7.55 per share for 2014. The new payout translates to a dividend payout ratio of close to 46% at the mid-point of $7.425. 3M’s dividend will be payable on March 12, 2014, to holders of record as of the close of trading on February 14, 2014.

We would point out that 3M’s 46% payout ratio compares to GE’s 50% or so payout ratio for 2014. With 3M shares up around $130 on the dividend and outlook news, 3M will yield 2.6% based on the new dividend hike. 3M’s prior yield was only about 2%. GE’s dividend yield is jumping up from 2.8% to about 3.25%. We pointed out that the GE dividend hike likely means that there is more good news coming that is not yet known.

24/7 Wall St. has two observations here. For starters, we effectively dared 3M to trump GE on the dividend hike, but with the admission that we did not expect an aggressive move. 3M seems to have taken it to heart, and this is even a month or two sooner than we expected the hike. Thank you, 3M!

Lastly, GE now almost certainly will be in the Dogs of the Dow for 2014. 3M would be moved into a runner-up category now that the payout was raised so much.