Source: PaxForex Premium Analytics Portal, Fundamental Insight

When a company with an iconic name like 3M is struggling, it's worth at least taking a look at what is happening and why. You might like what you see, or you might not, but it's better to know than to look back and regret not giving it the attention it deserves. Let's analyze what good and bad can be said about 3M today.

3M has increased its dividend every year for over six decades. That makes it an elite dividend king. What adds to the appeal is that the stock's dividend yield of 5.8% is on the high side of the company's historical yield range. In fact, the yield today is even higher than it was during the Great Recession. Add to that slow and steady dividend growth of more than 9% year-over-year over the past decade, and it's easy to see why dividend investors might be interested in the company's stock right now.

If you look at more traditional valuation metrics such as price to earnings, price to sales, and price to book value, 3M remains an attractive option. All three of these metrics are about halfway through their five-year averages. However, before you invest, know that Wall Street rarely shorts such stocks without good reason.

Dividends can help you understand what's going on. Although the 10-year annual dividend growth rate is nearly 10%, the rate is falling. Over the past five years, the average has been just under 5%. Over the past three years, the average has been just over 1%. And the most recent increase was only 0.7%. In essence, 3M's business has faced adversity, and growth has slowed.

The most obvious challenges facing the company today are inflationary cost pressures and the general ups and downs of its highly diversified business. While one could discuss these challenges in more detail, they are actually part of any company doing business in these challenging times. Given 3M's long history of success, it is reasonable to expect that it will overcome these challenges over time.

The bigger issue today is that 3M faces legal and regulatory challenges that will not end quickly and will not be easily resolved. The most high-profile recent development has been the lawsuits related to the earplugs the company sold to the military. The company has won some of these lawsuits and lost others, with 3M recently claiming that most of the plaintiffs are not actually suffering from hearing loss at all. Nevertheless, the lawsuit is costly and unlikely to end anytime soon. If 3M loses, it will result in a multi-billion dollar defeat.

The industrial giant is also grappling with problems related to the production of so-called "everlasting chemicals." This involves costly efforts to clean up contaminated environments and is likely to lead to years of litigation. The problems associated with these chemicals have prompted the company to phase out their production, which in itself will lead to costly write-offs. This process won't be completed until 2025, so there's still a lot to do before the final withdrawal.

Adding to the complications is the fact that 3M is also looking to separate its medical business. This area has long been considered a platform for growth, so the move to separate it may cause some concern. But on the other hand, it would shield the business from liabilities that interfere with the rest of the company's operations. Wall Street may offer a higher price for separation separately than as part of 3M. So this could be rare good news for shareholders, though it complicates the story.

Given long-term adverse factors, 3M may be not a suitable stock for risk-averse investors. There are simply too many company-specific concerns. However, it may make sense for more aggressive investors willing to bet that a company with an investment grade and a market capitalization of $50 billion, even after a significant stock decline, can withstand some legal and regulatory challenges. Indeed, stocks don't get into the deep value zone for no reason-you just have to make sure you can survive the uncertainty if you decide to buy them.

As long as the price is below 112.00, follow the recommendations below:

• Time frame: D1
• Recommendation: short position
• Entry point: 101.02
• Take Profit 1: 95.00
• Take Profit 2: 90.00

Alternative scenario: 

If the level of 112.00 is broken-out, follow the recommendations below:

• Time frame: D1
• Recommendation: long position
• Entry point: 112.00
• Take Profit 1: 115.00
• Take Profit 2: 120.00