Owning a diversified company can and often does mean revenues are reasonably consistent and profits flow like clock work. The usually means not all the time because a diversified company can mean more opportunities for a division not to do the right thing and lawsuits follow.

In an article by Brendan Pierson and Kannaki Deka of Reuters, 3M which is headquarter in Minnesota, said it has agreed to pay $6.01 billion to settle lawsuits by US military veterans and service members who suffered hearing loss from using the company’s earplugs.

About 240,000 people plus lawyers will be eligible for settlement. At its height, the litigation accounted for 30% of all federal court cases nationwide. The lead lawyers were Chris Seeger, Byan Aylstock and Clayton Clark.

The Combat Arms earplugs were made by Aearo Technologies, a company 3M acquired in 2008. The earplugs were used by the US military in training and combat from 2003 to 2015.

The lawsuits had claimed the company hid design flaws, fudged test results and failed to provide instructions for proper use.

3M said it was not admitting liability and the earplugs were safe and effective when properly used. The money will be paid out from 2023 to 2029 and $1 billion will be in 3M stock.

There were some analyst’s estimates that projected a $10 billion liability or $6 billion was good for the stock price.

Linking to dividend paying stocks, as investors you want the company to not only make consistent profits but do the right thing. Lawsuits are expected with a large organization; however the payouts are not. Litigation takes years to go through the court system and companies have set up a fund to payout claims. The smaller the claims, the more the company can pay to the shareholders. As an investor you want to know how big a claim your company has and if it makes you uncomfortable, look for alternatives and come back to the company after the lawsuit is over.

There are more questions than answers, till the next time – to raising questions.