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3M sets year's biggest U.S. buyback plan, raises dividend

Specialist trader Peter Elkins works at the post that trades Chevron, PVR Partners and 3M on the floor of the New York Stock Exchange, Octob
Specialist trader Peter Elkins works at the post that trades Chevron, PVR Partners and 3M on the floor of the New York Stock Exchange, Octob

By Sagarika Jaisinghani and Mridhula Raghavan

(Reuters) - 3M Co, whose products range from Post-It notes to films used in flat-panel TVs, said it could buy back up to $22 billion of shares in the five years through 2017, joining a list of companies announcing big capital returns to shareholders.

3M's repurchase plan brings the total buyback authorizations announced by U.S. companies this year to about $460 billion, the highest since 2007 and the onset of the global financial crisis.

The company's shares rose as much as 3 percent after it also raised its quarterly dividend by a third and said it would spend between $5 billion and $10 billion on acquisitions through 2017.

Morgan Stanley analyst Nigel Coe said the dividend increase signaled confidence, while the acquisition plans represented "a major shift in tone from this historically conservative team."

3M said on Tuesday it expected its 2013-2017 share repurchases to be in the range of $17 billion to $22 billion, up from its previous estimate of $7.5 billion to $15 billion.

The top end of the new range represents about 25 percent of 3M's market value - making its plan the largest possible capital return in percentage terms among U.S. companies that have announced buybacks this year.

Other companies announcing big buybacks this year include Microsoft Corp, Boeing Co and Deere & Co.

Companies typically buy back shares to increase the value of the stock remaining. However, share prices of many companies, including 3M, are at or near record highs.

"At this point in time, there does appear to be excess cash (and) corporations do not want to sit on such a large asset, especially considering the low return that their market instruments are making," S&P Dow Jones Indices analyst Howard Silverblatt told Reuters.

3M did not say how it would fund the buyback. It had cash and equivalents of about $2.3 billion as of September 30.

JP Morgan analyst Stephen Tusa noted that 3M's repurchase plan translated to only about $4 billion per year.

3M said in July it expected 2013 share repurchases to be in the range of $3.5 billion to $4.5 billion.

The company said on Tuesday it would raise its quarterly dividend to 88.5 cents from 63.5 cents, which works out to an additional payout of $585 million if maintained for a year.

St. Paul, Minnesota-based 3M forecast 2014 organic sales to rise by 3-6 percent, excluding the effect of foreign exchange. Analysts on average were expecting the company to report 2013 revenue of $31.01 billion.

3M said it expected earnings of between $7.30 and $7.55 per share next year. Analysts on average expected $7.40 per share on revenue of $32.63 billion, according to Thomson Reuters I/B/E/S.

3M shares were up 2.4 percent at $130.71 in afternoon trading on the New York Stock Exchange.

The stock, which hit an all-time high of $134.15 in November, has risen by more than a third this year.

(Additional reporting by James Kelleher; Editing by Joyjeet Das and Saumyadeb Chakrabarty)

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