Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Digging Through the Trash for Income Opportunities: Waste Management, Inc. (WM)

Waste Management, Inc. (NYSE:WM) is a prime example of a durable sector. Not only will human beings always continue to produce trash, but the amount of trash appears to be growing steadily. As such it is up to humanity to devise increasingly ingenious ways of dealing with this deluge of dirt. Stocks of companies active in this industry tend to trade defensively, enjoying low betas as well as high dividend yields. Waste Management, Inc. (NYSE:WM) is one of the largest American companies in the industry. While not as flashy a choice in the current bull market, the stock offers increased stability and reliable income.

Waste Management, Inc.Company at a Glance

Waste Management offers collection, transfer, recycling and disposal services to customers across North America, and operates a number of waste-to-energy and gas-to-energy facilities in the United States. Its recycling activities include material processing and electronic recycling, and recycling brokerage services. Additionally the company supplies sustainability services to businesses and organizations, and medical waste services for healthcare facilities. The stock enjoys a low beta of 0.64 and is more or less flat over the last 12 months, up 3.18%.

Investment Thesis

As mentioned above, waste management is a particularly durable industry. Companies active in this sector provide a more or less non-negotiable, essential service, and moreover one that appears to be becoming ever more necessary. Additionally, with its recycling and sustainability services, the company is well-positioned to benefit from the inevitable switch to more ecologically durable forms of harvesting energy.

The company is also doing well in terms of earnings; its EPS growth has outpaced the industry for the last five years. The company’s Q3 2012 report beat by a penny but growth seems to be slowing a bit this year as EPS was down 2 cents compared to the same period a year ago. Earnings in any case look a bit better than those of major US competitor Republic Services, Inc. (NYSE:RSG). After hitting it out of the park in Q2 2012, Republic missed in Q3 and Q4 of last year. Additionally EPS growth has lagged the industry slightly in the last few years.

One of the other major attractions of the industry, from an investor’s point of view at least, is the high dividend yield. Currently, Waste Management has a forward yield of 3.9%, and Republic’s is also quite high at 3%. Waste Management is growing dividends faster than the industry, but not as fast as Republic, averaging 12.7% per year compared to WM’s 8.1%. The payout ratio on WM’s dividend is quite high at 76%, Republic having a little more room to grow dividends than WM with a payout ratio of 59%.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.