Google will give Android users a choice of browser and search engine in Europe – The Verge

Google has announced that it will start asking European Android users which browser and search engine they would prefer to use on their devices, following regulatory action against the company for the way it bundles software in its mobile operating system. Last year Google was fined a record $5 billion by EU regulators for violating antitrust laws and was ordered to stop “illegally tying” Chrome and its search app to Android.

Google’s initial response was to start charging manufacturers licensing fees for the Play Store and other apps while offering the option to include Chrome and the Google search app in the overall package for free. Now, SVP of global affairs Kent Walker says in a blog post, Google will go one step further by offering users of “existing and new Android devices in Europe” a direct choice of services.

“On Android phones, you’ve always been able to install any search engine or browser you want, irrespective of what came pre-installed on the phone when you bought it,” Walker says. “In fact, a typical Android phone user will usually install around 50 additional apps on their phone … Now we’ll also do more to ensure that Android phone owners know about the wide choice of browsers and search engines available to download to their phones.”

Google hasn’t said when this will happen beyond “over the next few months,” nor has it said which competing products will be highlighted. The move will draw inevitable comparison to Microsoft’s “browser ballot” web page that it showed to Internet Explorer users in 2010 to comply with a similar European Commission ruling. Microsoft retired the page in 2014 after its obligation expired.

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Disney’s Bob Iger Hails “A Historic Day For Our Company” Following Fox Deal Close, Stresses Challenges Of Merging The Units – Deadline

Shortly after the Disney’s $71.3 billion acquisition of Fox assets officially closed at 12:02 AM ET Tuesday, the deal’s architect, Disney CEO Bob Iger, sent an internal memo to the incumbent and newly added employees titled “A Historic Day for Our Company.”

In the note, Iger outlined Disney’s plans for the future, stressing its focus on building a straight-to-consumer business to take on Netflix and Amazon.

He also warned of “the challenging work of uniting our businesses” that lies ahead. “Our integration process will be an evolution, with some businesses impacted more than others,” Iger said, asking everyone for patience as the company goes through the process of combining the various businesses that is expected to result in about 4,000 or so layoffs. He stressed that “we’re committed to moving as quickly as possible to provide clarity” how people’s roles may be impacted.

There are currently no post-merger town hall meetings with Iger scheduled but one of his new top lieutenants, Walt Disney Television chairman Peter Rice, is expected to address the staffs of the companies’ merged TV divisions next week.

Here are portions of Iger’s memo:

“I’d like to welcome our new colleagues, and thank employees on both sides of the deal for your patience and perseverance as we worked through the lengthy acquisition and regulatory process,” Iger wrote.

He then talked about the future.

“As you know, Disney has never been short on ambition. We’ve never been satisfied with the status quo, and our vision for this transformative era is our boldest yet. We are rapidly transforming our company to take full advantage of evolving consumer trends and emerging technology in order to thrive in this new and exciting time.

Our acquisition of 21st Century Fox was driven by our strong belief that the addition of these great businesses, brands, franchises and talent will allow us to move faster, reach farther and aim higher — especially when it comes to building direct connections with consumers “

Iger concluded his letter by addressing the uncertainty and anxiety stemming from the looming consolidation and the expected job cuts.

“I wish I could tell you that the hardest part is behind us; that closing the deal was the finish line, rather than just the next milestone. What lies ahead is the challenging work of uniting our businesses to create a dynamic, global entertainment company with the content, the platforms, and the reach to deliver industry-defying experiences that will engage consumers around the world for generations to come.

Out integration process will be an evolution, with some businesses impacted more than others. We’ve made many critical decisions already, but some areas will require further evaluation. We may not have answers to all of your questions at this moment, but we understand how vital information is, and we’re committed to moving as quickly as possible to provide clarity regarding how your role may be impacted.”

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Viacom Storms DirecTV With ‘Daily Show’ Warning Of Looming Blackout – Deadline

It’s no laughing matter to Viacom that AT&T could be dropping its channels from DirecTV and U-verse in just a couple of day but Comedy Central’s The Daily Show became the battlefield in the latest pay-TV carriage war tonight.

As host Trevor Noah listened to Neal Brennan’s mordacious takedown on the recent rise of socialism in political rhetoric (HINT: blame the rich) on the deliberately fake news show on Tuesday, a warning appeared on the bottom of the screen for a few seconds. “Your satellite TV provider is about to drop this channel and 22 others,” said the lower third directive aimed at DirecTV (see the photo above) and the midnight ET March 22 expiring contract.

Oddly, as a corresponding crawl seemed to start, Comedy Central suddenly became even more cropped. The move on channel 249 on DirecTV briefly reformatted the screen and the end of the segment with the Chappelle Show co-creator.

Viacom’s direct approach tonight to the dispute with DirecTV and AT&T’s U-verse system follows the media giant putting a series of ads on its own channels like Comedy Central, BET and Nickelodeon today about the dispute. Subsequent to  AT&T’s decision last week to drop Viacom networks from the basic tier of its new DirecTV Now packages, the Shari Redstone dominated company has also created a http://www.keepviacom.com website for the self-evident purpose. Among a number of videos on that site, there is hyperbolic Trevor Noah addressing the camera to say “if you thought government shutdowns are bad, get ready for something worse.”

Coming less than a month after the Department of Justice surrendered its efforts to halt AT&T’s $81 billion purchase of Time Warner, as talks continued towards Friday’s deadline, Viacom have also rallied the internal troops.

“In that same spirit of partnership, Viacom has been working to negotiate an agreement with AT&T to renew distribution of our channels on DirecTV and AT&T video services,” said Viacom CEO Bob Bakish in a memo to staff earlier today of the efforts to pull the plug on any blackout. “Despite these efforts, AT&T continues to insist on unreasonable and extreme terms that are totally inconsistent with the market,” the exec added. “Having recently acquired Time Warner, AT&T appears intent on using its new market power to prioritize its own content at the expense of consumers, who are growing increasingly dissatisfied with paying more for less.”

Or, to quote Brennan quoting Ice Cube in his Daily Show segment tonight: “You better check yourself, before you wreck yourself.”

Speaking of which, watch Brennan’s taking on American Socialism 2019 here:

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Asian shares slip from 6-month high ahead of Fed policy decision – Investing.com

© Reuters. A man walks past an electronic stock quotation board outside a brokerage in Tokyo© Reuters. A man walks past an electronic stock quotation board outside a brokerage in Tokyo

By Hideyuki Sano and Noah Sin

TOKYO/HONG KONG (Reuters) – Asian shares slid on Wednesday as investors took profits ahead of a policy decision by the U.S. Federal Reserve which is expected to shed more light on its interest rate plans for the rest of the year.

European stocks were expected to open lower, with futures tracking Britain’s , France’s and Germany’s indexes down between 0.5 percent to 0.7 percent in early trade.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.2 percent, weighed down by Australia and South Korea.

Japan’s climbed 0.2 percent while mainland Chinese blue-chip shares were flat.

Wall Street shares were narrowly mixed on Tuesday, with the losing 0.01 percent and the Nasdaq adding 0.12 percent. ()

Some market players said selling was triggered by a report of U.S. concerns that China is pushing back against American demands in trade talks.

Still, on the whole, many market players held on to hopes of a trade deal between Washington and Beijing as officials from both sides remained locked in negotiations.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin plan to travel to China next week for another round of trade talks with Chinese Vice Premier Liu He, a Trump administration official said on Tuesday.

“China is eager to come to an agreement so I’m not too worried. As long as they are holding meetings, many things will work out,” said Wang Shenshen, strategist at Tokai Tokyo Research Center.

Confidence among Asian companies remained near three-year lows in the first quarter as the U.S.-China trade dispute dragged on, pulling down a global economy that is already on a downward path, a Thomson Reuters/INSEAD survey found.[ASIATOPCO/]

Companies in the survey listed the global trade war as the top business risk, followed by higher interest rates and the slowing Chinese economy.

The Federal Reserve is widely expected to keep rates steady later in the day, putting the main market focus on its policymakers’ rate projections for the next few years.

(GRAPHIC: The Fed’s Dot Plot – https://tmsnrt.rs/2UDfpY1)

Since the beginning of year, Fed Chairman Jerome Powell has said the central bank would be patient – interpreted as code word for holding off on a rate hike – on signs of slowing economic growth in the United States and many parts of the world.

Financial markets have gone even further by pricing in a rate cut this year. Fed funds futures point to about a 30 percent chance of a cut by the end of year.

The Fed is also expected to lay out a plan to stop shrinking its $4 trillion balance sheet, or so-called quantitative tightening. Many policy makers have suggested the Fed is likely to conclude the process and stabilize its bond holdings by the end of this year.

“I think market consensus centers around an end in September but we expect the Fed to end its balance sheet rolloff in June, at around $3.85 trillion yen, based on our calculations on the amount of excess reserves the Fed will need,” said Shuji Shirota, head of macroeconomic strategy at HSBC Securities in Tokyo.

(GRAPHIC: Federal Reserve bond holdings – https://tmsnrt.rs/2UD2oOr)

Expectations of a more cautious Fed have dented the U.S. dollar, which has already been under pressure this year after Powell all but signaled a pause to the tightening cycle at the previous meeting.

The dollar’s index against a basket of six major currencies hit 2 1/2-week low of 96.288 on Tuesday and last stood at 96.445.

The euro traded little changed at $1.1347, near Tuesday’s two-week high of $1.1362.

The dollar fetched 111.54 yen, down slightly on the day and below Friday’s nine-day high of 111.90.

The Australian dollar dipped 0.1 percent to $0.7080, as the country’s bond yields extended their breakneck decline to multi-year lows on expectations of a domestic rate cut.

It was not helped by 6-percent fall in China’s iron ore prices on expectation of higher supply as Vale SA is set to resume work at its largest iron ore mine in Minas Gerais state.

The British pound remained hostage to headlines on Brexit.

Prime Minister Theresa May is expected to ask the European Union to delay Brexit by at least three months after her plan to hold a third vote on her deal was thrown into disarray by a surprise intervention from the speaker of parliament.

May had earlier warned parliament that if it did not ratify her deal, she would ask to delay Brexit beyond June 30, a step that Brexit’s advocates fear would endanger the entire divorce.

On the other hand, the EU’s chief negotiator, Michel Barnier, has said an extension would only make sense if it increased the chances of May’s deal being ratified by Britain’s House of Commons.

Sterling last stood flat at $1.3257, off its nine-month peak of $1.3380 hit a week ago.

Oil prices held close to four-month highs on expectations that OPEC would continue production cuts through the end of the year and after data from the American Petroleum Institute (API) showed a surprise draw-down on crude inventories.

U.S. West Texas Intermediate (WTI) futures was pretty much flat at $59.02 per barrel after touching their highest since November at $59.57 on Tuesday.

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Kale joins list of ‘dirty dozen’ fruits and vegetables most likely to contain pesticides – MarketWatch

You may want to put the green juice down for this one.

Kale ranked as a third-worst fruit or vegetable behind strawberries and spinach when it comes to pesticide contamination, according to the Environmental Working Group’s annual “Dirty Dozen” report. Over 92% of kale samples were found to have two or more pesticide residues — and a single piece of kale could have up to 18 pesticides on or in it.

One of the pesticides commonly found with kale was Dacthal, or DCPA. The pesticide, which is banned in Europe and was classified by the Environmental Protection Agency as a possible carcinogen, was found on nearly 60% of the kale samples tested.

Don’t miss: Here’s what Kool-Aid and cigarettes have in common

Here is the full list of the “Dirty Dozen” fruits and vegetables:

  • . Strawberries
  • . Spinach
  • . Kale
  • . Nectarines
  • . Apples
  • . Grapes
  • . Peaches
  • . Cherries
  • . Pears
  • . Tomatoes
  • . Celery
  • . Potatoes

The Environmental Working Group’s ranking is based on an analysis of test data from the U.S. Department of Agriculture. USDA personnel test fruits and vegetables for pesticide residues regularly, making sure to replicate how shoppers would consume the product. For instance, if consumers regularly wash and peel a fruit before eating it, the USDA testers will do that before examining the product for pesticides.

The USDA changes the batch of fruits and vegetables it tests based on consumers’ eating habits. As such, kale had not been examined in nearly a decade. The last time the USDA included kale in its testing, from 2006 to 2008, the leafy green ranked No. 8 on the Environmental Working Group’s Dirty Dozen list.

In those intervening years, kale has becoming an increasingly popular food, particularly among health-conscious consumers. A growing number of food products now contain kale as an ingredient, and scientists are even working to create a tastier version of the broccoli relative.

Consumers should opt for organic food whenever possible to reduce their exposure to pesticides, experts say.

But the vegetable’s soaring popularity isn’t necessarily to blame for its propensity for pesticide contamination. “Some of the changes could be due to more harvesting of kale, it could also be due to analytical methods changing when we’re testing,” said Alexis Tremkin, a toxicologist at the Environmental Working Group.

Also see: Why you should eat vegetarian—and not just because it’s healthier

Another factor could be how kale is grown. Dacthal, the potentially carcinogenic pesticide, is typically applied directly to soil as a weed-killer. Because it’s in the soil, it can then be absorbed into the plant itself, said Carla Burns, a research analyst at the Environmental Working Group . Growing practices like this may explain the pesticide contamination that’s endemic to much of the “Dirty Dozen” fruits and vegetables.

Altogether, some 70% of the conventionally-grown produce sold in the U.S. has pesticide residues, according to the report. However, consumers should stop eating fruits and vegetables as a result.

Instead, consumers should opt for organic food whenever possible to reduce their exposure to pesticides, experts say. And when that’s not feasible, they should opt instead for fruits and vegetables that are less likely to be contaminated.

The Environmental Working Group also released its annual “Clean Fifteen” produce list. Less than 30% of those fruits and vegetables have pesticide contamination, based on the USDA’s testing. The “Clean Fifteen” includes the following:

  • . Avocados
  • . Sweet corn
  • . Pineapples
  • . Frozen sweet peas
  • . Onions
  • . Papayas
  • . Eggplants
  • . Asparagus
  • . Kiwis
  • . Cabbages
  • . Cauliflower
  • . Cantaloupes
  • . Broccoli
  • . Mushrooms
  • . Honeydew melons

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Big problem facing the Green New Deal: A lack of power lines to deliver wind and solar – Washington Examiner

The Green New Deal would require an overhaul of the transmission lines that deliver wind and solar power, a major logistical obstacle to the progressive plan for radically revamping the economy to address climate change.

The Green New Deal’s plan to ramp up federal funding for wind and solar to reach 100 percent renewable or clean electricity won’t be sufficient without addressing transmission lines, which often meet political opposition at the local, not federal, level.

The Green New Deal resolution proposed by Rep. Alexandria Ocasio-Cortez, D-N.Y., and Sen. Ed Markey, D-Mass., does not explicitly mention transmission lines, although it does call generally for major repairs and upgrades to the nation’s infrastructure.

“It’s not getting enough attention from policymakers,” said Rob Gramlich, president of Grid Strategies LLC. “People often want to believe the myth you can get to high renewable energy without transmission networks. Unfortunately, that is not going to work.”

Transmission lines are critical to transporting electricity from places, typically rural areas, that have an abundance of wind or solar to consumers in population centers that don’t generate significant renewable electricity.

“There are major areas of the country where we have significant wind and solar resources that cannot reach market,” said Jeff Dennis, managing director and general counsel of Advanced Energy Economy.

Economists from the Brattle Group said in a report this month that policymakers risk overbuilding the electricity system with surplus wind and solar if they don’t appreciate the need for expanding the U.S. transmission system.

The Brattle Group projects $30 billion to $90 billion would have to be spent on transmission by 2030 to “cost-effectively” serve “the coming electrification of the American economy,” meaning more use of wind and solar for electricity, and more drivers using transportation powered by electricity. That investment would represent a 20 to 50 percent increase in average annual transmission spending compared to the past 10 years.

But building transmission is hard. Major long-distance transmission projects require 10 or more years to be approved and developed, because of a diffuse permitting process that is subject to delay because of local opposition from people living near the planned power lines — a problem known as not-in-my-backyard-ism, or NIMBYism.

Unlike with natural gas pipelines, which have also been plagued by NIMBYism mostly because of environmental reasons, the federal government has little power to approve transmission lines, with the authorities mostly delegated to states.

And the places where power lines would need to be built don’t necessarily benefit from using or generating the power, making it harder to get their approval to build.

“We have a real challenge in this country in siting transmission,” said Dan Reicher, the assistant secretary of energy in the Clinton administration. “In-between states that only serve as locations of the line don’t see much benefits and see it more as a problem, and can stop it from being built.”

For example, New Hampshire last year rejected the Northern Pass transmission line project, which would import zero-emission hydroelectric power from Quebec to New England, even though leaders in Massachusetts wanted to use the hydropower to help meet the state’s clean energy goals.

The Federal Energy Regulatory Commission, which regulates energy transmission, has been wrestling recently with the need to build and improve lines in order to facilitate renewables. It plans to begin a process this week of reviewing its policies for setting rates and incentives for the construction of transmission lines — a move the Trump administration, no fan of the Green New Deal, has encouraged.

A top priority of mine is making sure we have policies in place to ensure the grid of the future,” FERC Chairman Neil Chatterjee, a Republican, told the Washington Examiner in an interview. “As we look to transmission, there are a host of things we can do.”

FERC does not have authority to directly site transmission projects, though, so there is a limit to what it can do.

Chatterjee and others say FERC’s current process is not working as intended because it does not provide extra incentive for long-distance power lines, which are riskier than smaller projects that are easier to build.

“It is unquestionably the case that these longer lines are harder to site and more difficult to get past the finish line,” said Travis Kavulla, director of energy and at the R Street Institute. “The reward for that risk should be reflected in the rates that FERC authorizes for long-haul transmission lines.”

Former FERC Chairman Jon Wellinghoff, a Democrat, agrees with Kavulla’s sentiment, but said policymakers should be encouraging investments in advanced transmission technologies that can make the existing system more efficient.

He said less than half the capacity of current transmission lines is being fully utilized.

Wellinghoff is also excited about the potential of a new underground transmission line planned by two European companies to transport wind and solar from the Midwest to the East Coast, an untested method that is more expensive than an above-ground line, but that could avoid backlash caused by visible power lines.

“The Green New Deal will help elevate the infrastructure discussion on how to make transmission more efficient, smarter, and more cost effective in delivering renewable resources to load centers,” Wellinghoff said. “We should do it a smart and not stupid way, and not put in the same old lines and wires.”

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San Francisco weighing first-of-its-kind ban on e-cigarettes – NBCNews.com

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SAN FRANCISCO – San Francisco is trying to crack down on electronic cigarettes that critics say aggressively target kids. An official on Tuesday proposed what’s thought to be the first U.S. ban on their sale until the federal government regulates vaping products.

City Attorney Dennis Herrera said San Francisco, Chicago and New York sent a joint letter demanding that the U.S. Food and Drug Administration evaluate the effect of e-cigarettes on public health.

Herrera said the review should have been completed before e-cigarettes entered the market. The FDA released proposed guidelines last week giving companies until 2021 to submit applications for the evaluation.

Daryl Cura demonstrates an e-cigarette at Vape store in Chicago on April 23, 2014.Nam Y. Huh / AP file

“The result is that millions of children are already addicted to e-cigarette, and millions more will follow if we don’t act,” he said Tuesday.

Most e-cigarettes contain nicotine, which is addictive and can harm adolescent brains that are still developing. In the U.S., youth are more likely than adults to use e-cigarettes.

San Francisco Supervisor Shamann Walton introduced legislation banning the sale of e-cigarettes in the city unless they get an FDA review. Supporters say that if the measure is approved, it would be the first such prohibition in the country. Its chances are not clear.

“We have people addicted to nicotine who would have never smoked a cigarette had it not been for the attractive products that target our young people,” said Walton, a former president of the San Francisco Board of Education.

Anti-tobacco activists say e-cigarette makers target kids by offering products in candy flavors and using marketing that portrays their products as flashy gadgets.

San Francisco was the first city in the United States to approve an outright ban on the sale of flavored tobacco and flavored vaping liquids, which voters upheld in 2018. The city prohibits smoking in parks and public squares and doesn’t allow smokeless tobacco at its playing fields.

The city has often been on the forefront in passing liberal social policies that clash with business interests, whether it’s banning single-use plastic bags or the sale of fur products.

The FDA declined immediate comment on the letter from the three cities.

A customer exhales vapor from an e-cigarette at a store in New York on Feb. 20, 2014.Frank Franklin II / AP file

Manufacturers were supposed to submit most products for review by August 2018, but FDA Commissioner Scott Gottlieb in 2017 delayed the deadline until 2022. He said at the time that both the agency and the industry needed more time to prepare.

The agency unveiled proposed guidelines last week moving up the deadline to August 2021 and restricting sales of most flavored products to stores that verify the age of customers upon entry or that use a separate, age-restricted area for vaping products.

In 2018, more than 3.6 million U.S. middle and high school students used e-cigarettes in the past 30 days, including nearly 5 percent of middle school students and nearly 21 percent of high school students, the Centers for Disease Control and Prevention reported.

Walton also introduced legislation that bars making, selling or distributing tobacco on city property. That proposal is aimed at Juul Labs, an electronic cigarette company that rents space on Pier 70.

“We don’t want them in our city,” Walton said.

A spokesman for Juul said the proposed legislation would limit adult smokers’ abilities to access e-cigarettes that could help them kick regular smoking habits.

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3M: This Dividend Royal Will Crush The Market In The Next 5 Years – Seeking Alpha



Image Source: imgflip

As I’ve discussed in previous articles, I look at three factors before making an investment, in addition to the fundamentals of a company (i.e. growth catalysts, financial strength, etc).

The factors that I’m referring to are current dividend yield, dividend safety, and dividend growth.

While the first metric doesn’t necessarily require that a company trade at a discount to fair value (provided it’s an excellent company), that company must trade close to fair value for me to warrant examining the company further.

After all, an investment may offer an abnormally high yield, but it very well may be a dividend with no growth potential, or worse yet, a dividend that is at moderate to high risk of being cut. This is the very definition of a yield trap. If the yield seems too good to be true, it often is. There are exceptions to this rule, and finding those exceptions can prove to be a very lucrative investing strategy if one is up to the task of examining a company with a high level of detail to determine if the investment thesis of that company is still intact.

Kraft Heinz (KHC) is a recent example of a yield trap that comes to mind. Coincidentally, it was a company that I considered investing in about a year back. Ultimately, it was the debt, stagnant growth prospects, and 3G’s poor reputation that precluded the company from being an attractive dividend growth investment, in my opinion.



Image Source: Simply Safe Dividends

Fortunately, I didn’t make that investment. Unfortunately for Kraft Heinz shareholders, Kraft Heinz announced a 36% dividend cut recently, not to mention the news of an SEC investigation and a $15.4 billion write down to two iconic brands (Kraft and Oscar Mayer).

It’s events like this that remind us that 1) examination of dividend safety (via independent research and Simply Safe Dividends) is important, and 2) diversification is important. There aren’t any investors that get every investment right and you don’t want to be too reliant on one investment for your income when things go south.

This leads me into the next point that dividend safety and dividend growth are of utmost importance. As an investor, I want to be reasonably assured that a dividend will not only be maintained, but grow in the years ahead.

With that said, I believe I’ve found an investment that provides a high probability of being able to fulfill those three prerequisites before I make an investment.

I’m referring to the industrial giant and Dividend King, 3M Company (MMM). We’ll discuss why I believe 3M is set to deliver market-crushing returns in the next 5 years and beyond, delving into the dividend profile of 3M, the fundamentals of the company and risks to consider, as well as the current stock price in relation to my estimated fair value.

In doing the above, we’ll arrive at my estimated annual total returns on 3M in the next 5 years.

Reason #1: A Safe And Growing Dividend

As I indicated above, the dividend profile offered by a company is incredibly important to my selection process. In this section, I’ll detail why I believe 3M’s 60 year dividend increase streak is safe and offers the potential for strong growth in the years ahead, and how I arrived at this conclusion.

We’ll first examine the safety of 3M’s dividend by delving into the company’s ability to generate earnings per share and free cash flow against its current dividend obligation. My assessment of the dividend safety will then be reconciled against that of the investment research firm Simply Safe Dividends.



Image Source: 3M Q4 2018 Earnings Presentation

As shown above, 3M generated GAAP EPS of $8.89 in FY 2018 against the $5.44 paid out during that time. This equates to a 61.2% trailing twelve months EPS payout ratio, which is on the elevated side of the ~50% that I like to see. However, the one time events including the TCJA adjustment, Q1 2018 legal settlements, and CMD divestiture gain distorted this payout ratio. Factoring those out we would arrive at a TTM EPS payout ratio of 54.6%, which is a bit more in line with what I like to see, that leaves the company with plenty of capital to invest back into the business.



Image Source: 3M Q4 2018 Earnings Presentation

With an EPS midpoint of $10.68 forecasted for FY 2019, this would indicate a 54.0% forward EPS payout ratio. This again is a near perfect payout ratio that strikes a great balance between rewarding shareholders in the present while also focusing on the future. It’s no surprise that I would rate this dividend as very safe for the foreseeable future.

Next, we’ll delve into FCF payout ratio over the trailing twelve months. Per page 60 of 3M’s most recent 10-K, the company generated $6.439 billion in operating cash flow against $1.577 billion in capital expenditures, for total free cash flow of $4.862 billion in 2018. This is against the $3.193 billion in dividends paid out during that time, for a TTM FCF payout ratio of 65.7%.



Image Source: 3M Q4 2018 Earnings Presentation

Given the recent 5.9% dividend increase, the dividends paid in 2019 should be roughly $3.381 billion. Assuming a midpoint free cash flow conversation ratio of 100%, this would mean that free cash flow should come in around $6.25 billion. This would imply a forward FCF payout ratio of 54.1%.

Using the FCF payout ratio, we arrive at the same conclusion that 3M’s dividend is well-covered and very safe.



Image Source: Simply Safe Dividends

As evidenced above, our independent research and the conclusion we formed regarding the safety of 3M’s dividend was reinforced by Simply Safe Dividends.

This is reassuring information from my perspective as a dividend growth investor because Simply Safe Dividends has successfully predicted 98% of dividend cuts since its inception in 2015.

The 2% of dividend cuts that weren’t predicted ahead of time were generally due to the fact that there were smaller companies which changed their capital allocation policy and invested more back into their business. Simply Safe Dividends has learned from these cuts and now awards lower scores to smaller companies with more dynamic capital allocation policies. There are also incidents that Simply Safe Dividends really can’t predict like the dividend suspension by PG&E in 2017, as a result of the investigation into the extensive wildfire damage in California and PG&E’s decision to preserve cash in the event of being held liable to the tune of billions for those damages.

Having extensively discussed the safety of 3M’s dividend, we’ll now cover the growth prospects of 3M’s dividend in the years ahead.



Image Source: Simply Safe Dividends

As shown above, 3M has delivered some impressive dividend growth in both the last 5 years and 20 years.

I believe this trend is set to continue in the years ahead, in large part because of the growth estimates for 3M over the next 5 years.

With analysts at Yahoo Finance forecasting 7.1% annual earnings growth over the next 5 years and Nasdaq forecasting 10.2% annual earnings growth over that same period, there seems to be a strong consensus that 3M will deliver high single-digit earnings growth in the years ahead.



Image Source: 3M Q4 2018 Earnings Presentation

Given that management indicated in their 2019 capital allocation slide that they will grow their dividend in line with earnings, this bodes well for investors in the years ahead.

Next, we’ll examine why analysts are optimistic that 3M will be able to deliver the aforementioned earnings growth in the coming years.

Reason #2: Strong Company Culture And Ability To Execute On Growth Plans

With over 60,000 products used in businesses, homes, hospitals, and schools in over 200 countries around the world, 3M is a global industrial icon and conglomerate.

3M operates in five main business segments, covering 46 technology platforms, including adhesives, abrasives, and nanotechnology.

Listed below is a summary of 3M’s sales for each segment.

The Industrial segment accounts for over a third of sales (37%), according to page 22 of Form 10-K (accounting for the elimination of dual credit, which is 8%), and includes products such as tape, sealants, abrasives, and adhesives used by automotive, construction, and electronic companies.

The Safety and Graphics segment accounts for 21% of sales, and includes traffic safety products, commercial safety and cleaning products, and personal protection equipment.

The Healthcare segment generates nearly a fifth of sales (18%), and includes food safety products, healthcare data systems, and dental and orthotic products.

The Electronics and Energy segment generates 17% of sales, and includes insulation, touch screens, renewable energy components, and infrastructure protection equipment.

The Consumer Products segment accounts for 15% of sales, and includes the iconic post-it notes, tape, sponges, and adhesives.

It’s this level of diversification among business segments, in addition to the geographic diversity of 3M’s revenues that make 3M a truly global and leading industrial conglomerate.

According to page 84 of 3M’s Form 10-K, 3M generated nearly half of its earnings before income tax or EBIT in the United States (49.8%), while the other half (50.2%) was generated internationally.

The size and scale of this company is simply impossible to replicate overnight. One simply doesn’t start an industrial conglomerate in their garage and compete with 3M.

It’s this size that allows 3M an economy of scale that gives it an advantage over its smaller industrial competitors. This is the basis for the wide moat many say 3M possesses. The level of innovation present within 3M is simply incredible and has been a constant since its founding over 100 years ago.

We’ll start by examining the company’s management team. After all, a management team is a primary factor in leading a company to achieve its strategic goals, and it’s what separates the best from the rest in an industry.

Michael F. Roman

Image Source: 3M Corporate Officers

The new CEO, Mike Roman, who took over for the previous CEO, Inge Thulin in July 2018 seems like he is well-rounded and should be able to continue to build upon the success that Inge Thulin provided 3M with during his tenure.

We need to only consider the fact that Mr. Roman has spent 30 years with 3M, serving in a variety of roles throughout all segments of the company. Mr. Roman has served as COO and was previously in charge of international operations for all five of 3M’s segments.

Mr. Roman will continue to lead 3M down the path of maintaining its strong commitment to R&D, which is important considering that a third of 3M’s sales come from products invented in just the last 5 years.



Image Source: 2018 3M Investor Day Presentation

As was indicated by Mike Roman in the last earnings call, 3M is dedicated to increasing its R&D from its historical average of 5.5% of sales, to 6%. Though the company fell short of reaching that target in Q4 2018, Mike Roman reiterated 3M’s commitment to reaching that 6% goal.

We are committed to driving that model, that 6% R&D and the investment in capex that goes along with it. If you look at 2018, we actually did have an increase in headcount, so it’s a better reflection maybe of our commitment to that ongoing investment. CEO Mike Roman



Image Source: 2018 3M Investor Day Presentation

This commitment to continued innovation is expected to serve the company well and lead to strong results in the years ahead. Earnings per share growth is expected to come in around 8-11% over the next 5 years. We’ll analyze below how the company expects to achieve this growth in the coming years.



Image Source: 3M Q4 2018 Earnings Presentation

With efforts to expand R&D in technology platforms, such as air filtration, healthcare, and renewable energy that are expected to achieve strong growth from 2019 to 2023, 3M is expecting 3-5% local currency growth in revenues during that time.

The company is also well-known for its Lean Six Sigma approach to managing its operating divisions and is not afraid to sell off under-performing assets to bring its returns up to acceptable levels.

3M is in the final phases of its plan to close 30 of its manufacturing facilities and move productions to its facilities that have been improved through automation. This measure is estimated to be a $500-600 million cost saving program and serves as another example of the company’s commitment to practical margin expansion, without harming its underlying business and risking its reputation in the process.

As such, this is expected to drive 2-3% margin expansion and contribute toward that 8-11% earnings growth.



Image Source: 2018 3M Investor Day Presentation

Another component that is expected to contribute 1-3% to earnings growth is through management’s conservative, bolt-on acquisitions to boost revenue.

While industry peers often focus on multi-billion dollar deals that are sometimes overpriced, 3M has taken the approach to engage in occasional deals which it thinks will add value to an existing business line.

As 3M recently demonstrated with its $1 billion M*Model acquisition, the company is focused on strengthening its existing healthcare information unit and although small (<1% of 3M's total sales), 3M is paying a reasonable 10 times EBITDA for a firm that generates $200 million in annual revenue.



Image Source: 3M Q4 2018 Earnings Presentation

In addition to the growth plans laid out above, 3M is also known to be conservative in its use of debt. The company boasts an AA- credit rating and a stable outlook. While management expects to invest in growth projects and initiate share repurchases over the next 3 years, the $5 billion in added leverage planned over that time isn’t likely to cause any balance sheet issues in terms of 3M’s net debt load increasing from $10 billion to $15 billion, in the event 3M comes close to delivering on the results they have projected.

Risks To Consider

Now that we’ve discussed that the attractive dividend profile and growth prospects of 3M, I’d like to make it clear that even as the bluest of blue-chips, 3M doesn’t come without its risks. As with any equity investment, there are risks that investors need to consider before investing their hard earned money in a company.

I’ll refer interested readers to pages 10-12 of their most recent 10-K Form for a very comprehensive and in-depth listing of the various risks facing 3M.

As we were reminded with the $850 million settlement with Minnesota’s Attorney General in February 2018, amid allegations of a former Scotchgard ingredient that got into the state’s drinking water, it’s important to remember that litigation can be a sizable expense for a company like 3M. The legal settlement caused earnings to be $1.28 lower than they otherwise would have been in 2018.

While another lawsuit of that magnitude wouldn’t be devastating for a company of 3M’s size, it is still a setback and risks like that need to be considered going forward.

Yet another risk that is especially relevant to an industrial company such as 3M is the risk that trade wars and economic slowdowns would create issues for 3M in the short to medium-term. While 3M has endured many recessionary periods, it would no doubt lead to earnings that are decreased for a short period of time.

It’s those earnings that are slightly decreased and a compressed multiple that would lead to a stock price that would suffer in the midst of a recession. For instance, 3M’s stock price was around $94 a share in July 2007 and crashed to around $50 a share at the climax of the Great Recession to begin 2009.

This type of volatility from one economic cycle to the next makes 3M a company that is only worth holding from economic cycle to economic cycle. If one isn’t able to handle that type of volatility and potential downward pressure, they’d be best off avoiding equities altogether and especially a cyclical company such as 3M.

Along those lines, it’s also important to remember that 3M only generates 39% of its sales in the United States. The other 61% is derived from international sales. Currency fluctuations are yet another macro risk facing a global company such as 3M and have the ability to either be disruptive or beneficial to a business. However, in the long run, currency fluctuations tend to even out.

While the risks facing 3M are typical for an industrial company, 3M’s exceptional culture has allowed it to hedge these risks and grow its dividend for longer than most have been alive and pay an uninterrupted dividend for over 100 years.

I don’t envision this time being different and I believe 3M will continue to adequately address these risks in the future.

Reason #3: An Excellent Company Trading At Fair Value

As important as it is to find an excellent company in terms of fundamentals, it’s arguably just as important to buy at a price that is close to fair value. In the case of 3M, the company is trading roughly in the middle of its 52 week average, so while this isn’t a company trading at a steep discount at the current price of $208.08 per share (as of March 15, 2019), I do believe 3M is trading at fair value. We’ll delve into more detail why I believe this is the case below.

I use a variety of methods to value stocks, to arrive at an estimated average fair value. It is based upon this average fair value that I can forecast total returns over the next 5 years for a stock.

The first method that I’ll examine is the forward price to earnings ratio or forward PE ratio. A forward PE ratio that is below the 5 year average could indicate that 1) a company’s fundamentals have deteriorated and warrant a lower valuation multiple (as the fundamentals of 3M indicate, this doesn’t appear to be the case), or 2) the company is trading at a discount to fair value or at fair value, offering an attractive buying opportunity.

The forward PE ratio of 3M is currently 19.34 in comparison to its 5 year average of 19.53 per Morningstar, for a 1% discount to fair value. This would imply that 3M is fairly valued at $210.12 a share, offering 1% upside in multiple expansion in the next few years.

Another method of valuation that I use to determine the fair value of dividend growth stocks is comparing the current dividend yield against the 5 year average of the stock.

3M is currently offering a 2.77% dividend yield against the 5 year average of 2.53%, per Simply Safe Dividends. The EPS dividend payout ratio has essentially held firm in the past 5 years, so this increased yield isn’t because of an increasing EPS payout ratio. The main factor for this increased dividend yield is because the 30 year treasury is currently yielding 3.01% (as of March 15, 2019). Due to that 3% risk-free rate, investors are demanding an increased dividend yield to take on the risks that accompany an equity investment such as 3M.

Even if we make the assumption that the fair value yield of 3M is 2.75% going forward over the next 5 years, that would imply 0.7% upside from this point in valuation expansion.

This would again imply a fair value yield of about $210 a share, meaning that 3M is trading at a 0.9% discount to fair value while offering 0.9% upside.

One final valuation method that I use to determine fair value is via the dividend discount model or DDM.



Image Source: Investopedia

The first variable of expected dividend per share is also the simplest and can be found in seconds. 3M’s current annualized dividend per share is $5.76.

The next variable of cost of capital equity is another term for the required rate of return. This variable can vary widely from investor to investor, but for the sake of this discussion, I’ll use 10% as that is slightly above the average for equities in recent decades.

The final variable of dividend growth rate is the most difficult input in this function, but I predict this variable as best as I can based upon both what the company proven it is capable of in the past, as well as based upon the growth estimates in the years ahead.

I view a 7.25% long-term dividend growth rate to be realistic when we consider that 3M is expected by analysts to maintain the status quo and grow its earnings by high single digits in the years ahead. As the company continues to grow larger, we’d expect a moderate deceleration from the 16% 5 year dividend growth rate and a slight deceleration from the 8% 20 year dividend growth rate.

Given this information, the fair value of 3M using the DDM is $209.45 a share. This would imply a 0.7% discount to fair value, offering 0.7% upside.

Averaging these three fair values together, we arrive at a fair value of $209.86 a share. This would imply that 3M shares are trading at a 0.8% discount to fair value, offering 0.9% upside.



Image Source: izquotes

While this isn’t a bargain in terms of discount to fair value and a recession in the near-term would lead to more attractive valuations for investors, I believe this could present an attractive buying opportunity for investors with little or no exposure to 3M to dip their toes in the water, so to speak. Those that already own sizable stakes in 3M would likely be better off to be patient and wait for their price to selectively add.

Summary: 3M Offers Investors A High Probability Of Market Crushing Returns

3M epitomizes dividend growth investing and boasts a track record of raising dividends that dates back to Eisenhower administration, raising dividends through numerous recessions, multiple wars, stagflation, and the dot-com bubble.

Based on the safety and the viability of 3M’s dividend, there is no reason to believe this 60 year streak can’t continue, especially considering the next point.

3M has proven itself time and time again that it’s capable of delivering in terms of underlying earnings growth to support those growing dividends. Given the growth catalysts discussed earlier, this time looks like it will be no different.

Although 3M isn’t a value play, it’s important to remember that 3M is one of the bluest of blue-chips. It’s this stability and predictability of 3M that ensures it very rarely trades at a “discount.”

Given 3M is trading at fair value currently, it’s a great stock for investors to consider initiating a position in or adding if they have a small position with room to grow. I would advise that those with 3M positions that are full or nearly full wait until we enter the next recessionary period, presumably in the next couple years.

Regardless, 3M is set to deliver a ~2.8% starting dividend yield, 7-8% earnings growth over the next 5 years (which could prove to be conservative), and 0.2% multiple expansion in the next 5 years. This would lead to likely 10-11% annual total returns over the next 5 years, thereby beating the market and delivering alpha.

Disclosure: I am/we are long MMM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Monsanto Weed Killer Roundup Was ‘Substantial Factor’ in Causing Man’s Cancer, Jury Says – The New York Times

A federal jury found Tuesday that Monsanto’s popular weedkiller Roundup was a “substantial factor” in causing a California man’s cancer, dealing a significant blow to the company as it aggressively defends its products against thousands of similar claims.

The six-member jury delivered the unanimous verdict in the United States District Court in San Francisco, months after a groundskeeper who said Roundup caused his cancer was awarded about $80 million in a separate case in California.

Tuesday’s verdict concluded the first of two phases in the federal case about the possible health risks of Roundup and whether Monsanto misled the man, Edwin Hardeman, about those risks.

Mr. Hardeman used Roundup to control weeds and poison oak on his property for 26 years. He was diagnosed with non-Hodgkin’s lymphoma in 2015.

The second phase of the case, which begins Wednesday, will focus on whether Monsanto, which was acquired by Bayer AG last year, should be held liable for partly causing Mr. Hardeman’s cancer, said his lawyer, Jennifer Moore. Ms. Moore said lawyers would seek to prove that Monsanto manipulated public opinion and science to play down Roundup’s health risks.

Lawyers will argue that Monsanto knew or should have known that Roundup causes cancer, Ms. Moore said in an interview Tuesday. Mr. Hardeman’s team will ask that the jury have the company pay his medical bills and an undetermined amount of damages, she added.

“We feel confident based on the evidence that a jury, when presented with all of the evidence, will see that Monsanto has committed 40 years of corporate malfeasance,” Ms. Moore said.

Bayer said in a statement Tuesday that it was disappointed in the jury’s verdict and that “the evidence in phase two will show that Monsanto’s conduct has been appropriate and the company should not be liable for Mr. Hardeman’s cancer.”

“We have great sympathy for Mr. Hardeman and his family, but an extensive body of science supports the conclusion that Roundup was not the cause of his cancer,” Bayer said in the statement. “Bayer stands behind these products and will vigorously defend them.”

The verdict in the closely watched case is a milestone in the contentious public debate over Roundup, which was Monsanto’s flagship product. Its active ingredient, glyphosate, is the world’s most widely used weedkiller.

Ms. Moore said the verdict would likely influence the thousands of other similar cases — about 11,200 people had sued Monsanto over Roundup as of February, according to Bayer.

Bayer, on the other hand, said the jury’s decision Tuesday “has no impact on future cases and trials because each one has its own factual and legal circumstances.”

Edward K. Cheng, a Vanderbilt University law professor, said that legally, Tuesday’s finding cannot be used as precedent in other Roundup cases. But practically, he said, Tuesday’s verdict and the verdict from last year, in which juries have found a link between Roundup and cancer, “have some import.”

“What ends up happening is these start to be markers,” he said. “I would expect that Monsanto is going to start thinking about ‘How much risk do we face here?’ if one jury after another is going to say ‘Yes.’”

Bayer has consistently defended the safety of Roundup and glyphosate, and industry-funded research has long found the herbicide to be relatively safe. Regulators have mostly agreed.

In December 2017, the Environmental Protection Agency issued a draft human health risk assessment that said glyphosate was most likely not carcinogenic to humans.

Central to the criticism of Roundup, however, is a decision by the World Health Organization’s International Agency for Research on Cancer in 2015 to declare glyphosate a probable carcinogen.

That spurred Mr. Hardeman to file a lawsuit in February 2016, and prompted California to declare glyphosate a chemical that is known to cause cancer.

In August, a California jury found that Monsanto had failed to warn a school groundskeeper of the cancer risks posed by Roundup, which he used as part of his job as a pest control manager. Monsanto was ordered to pay $289 million in damages.

In October, a judge reduced that total to about $80 million, saying the jury’s award was too high. Monsanto is appealing that verdict, a spokesman said.

Mr. Hardeman’s case was the first federal case to go to trial, Ms. Moore said. She said the legal team presented expert testimony and research that Roundup causes mutations in human cells and that human populations that are exposed to Roundup are more likely to develop non-Hodgkin’s lymphoma.

Documents unsealed in 2017 in Mr. Hardeman’s case suggested that Monsanto had ghostwritten research that was later attributed to academics. The documents indicated that a senior official at the E.P.A. had worked to quash a federal review of glyphosate.

The documents also revealed that there was some disagreement within the E.P.A. over its own risk assessment.

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Tesla’s Meandering Energy Strategy Is Still Killing Solar – Motley Fool

When Tesla (NASDAQ:TSLA) bought SolarCity for $2.6 billion in 2016, it was supposed to create an energy powerhouse that could drive the future of renewable energy. People could buy solar, energy storage, and an electric vehicle under one roof and have a fully integrated energy solution. Cutting ties from the grid couldn’t be far off. 

Less than three years after the acquisition closed, Tesla’s solar business is a shell of its former self and continues to lose ground. And it appears solar will continue to be an afterthought as Tesla tries to steady its vehicle business. 

Home with a solar roof

Image source: Tesla.

Tesla’s meandering solar sales strategy

When Elon Musk announced in late February that Tesla would be closing most of its retail locations (a move that was later reversed) it was a shock to people observing the auto business, but it should have been even more shocking on the energy side of the business. One of the arguments Musk made for buying SolarCity was that he could move sales into Tesla showrooms and pair more auto sales with solar and energy storage, leveraging the product ecosystem and retail infrastructure to increase sales and lower costs. To that end, Tesla shut down door-to-door sales that accounted for most of SolarCity’s sales and moved solar into some showrooms. The strategy hasn’t been successful so far, with solar installations dropping like a rock, but Musk continued to argue that solar would eventually turn the corner and that showrooms were key to solar’s growth. 

During the fourth-quarter 2018 earnings announcement, Musk said:

We deployed 73 MW of retrofit solar systems in Q4, a 21% decrease sequentially. We are still in the process of transitioning our sales channel from former partners to our Tesla stores and training our sales team to sell solar systems in addition to vehicles.

Less than a month later, that argument died when retail closures were announced, even though the closures may not ever happen. Tesla clearly doesn’t have a strategy for selling solar energy, and it’s become a total afterthought to the business. 

What in the world is Tesla doing with energy? 

Tesla could be one of the most innovative companies in energy if it put some effort into it. It has a large solar manufacturing facility in Buffalo, NY (that reports indicate are largely unused) and innovative products like the solar roof and Powerwall. But it doesn’t have much traction with either product in the market, and it doesn’t have a clear sales or manufacturing strategy. 

As Tesla struggles, more focused competitors like Sunrun and SunPower are expanding their capabilities and increasing market share in the U.S. Both now have their own energy storage products that pair with solar systems, which is what Tesla said it was going to do with SolarCity. 

Tesla was never really an energy company

As much as it may have made sense on the surface for Tesla and SolarCity to combine, Tesla never really took energy seriously. When push came to shove, the auto business was always going to win out, and that makes it tough to grow and innovate in an industry as competitive as solar energy. 

At the end of the day, Tesla’s meandering energy strategy will likely be what dooms its solar business. Retail solar was the future just a few months ago, only to be put on the chopping block with no clear replacement. How are workers or customers supposed to take Tesla Energy seriously when Tesla itself doesn’t appear to take solar seriously? That’s a question Elon Musk has to answer before I would consider spending tens of thousands of dollars to put Tesla’s energy products in my home, and by the look of Tesla’s solar decline, other customers have the same reservations. 

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