Thursday, July 23, 2009

3M Dividend Reality Check Coming Soon

3M (MMM) announced Q2 results and admitted to lower revenues and lower earnings. But it beat expectations so the market is now going gaga. OK times are tough no one is truly happy with the fundamentals but it’s all understandable until you look at dividends and then the sources and uses of cash.

The dividend is up in the face of declining earnings. How long can you keep that bluff up? Net cash from operations for six months is close to the same when comparing 2009 to 2008. Debt has been repaid which is good. Purchases of Treasury stock have been drastically reduced. The company is redecorating its financial engineering profile. The other shoe will drop sooner than later.