Waste Management: High Dividend, Attractive Price
Helen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Waste Management (NYSE: WM) does the job that nobody wants to do, but it’s a job that has to be done. Luckily, Waste Management is a publicly traded company that we can all benefit from, if we know to invest wisely. With a dividend at just over 4% and trading at around $35 per share, investing in trash is looking good.
Waste Management deals with something that we all know is growing, and they are the biggest recycler in the country. Which means that they take all of our waste and turn it into a profitable and secure long term stock investment.
In the business of dealing with waste, there’s not that much competition. They call them environmental stocks because without companies like Waste Management and Market Vectors Environmental Services ETF (NYSEMKT: EVX) things would be pretty miserable. They provide environmental services, which is a fancy way of saying that they clean up after human beings so our living environment is not sent back to the dark ages.
And the way we appreciate these companies is reflected in the way their stock prices steadily move upward. An investment in environmental services benefits long term portfolios in a safe and sustainable way. Meanwhile, on the competition front, Veolia Environment (NYSE: VE), who used to provide waste collection in the U.S. has seen a 51% shrink last year and is leaving the business of U.S. waste collection. Waste Management is most likely cheering that decision.
Besides Veolia, Waste Management doesn’t have a lot of competitors, certainly none that compare to its enormous size. If global demographic trends can be trusted, Waste Management has a lot of space to grow further. We are looking at unprecedented growth in population around the world as well as in the United States. More people means more trash.
Dividends for Your Future
For a long time, I didn’t pay any attention to dividends. If I found a stock I liked and it happened to produce a modest dividend, you wouldn’t find me complaining. But I certainly never found myself searching out dividends, mostly because so many of them are just disappointing. But the fact is, dividend stocks are a great idea. Your dividends can go right into further investment, pushing your stock holdings up without your even thinking about it. Assuming the dividend is worth mentioning.
Waste Management may be the perfect dividend stock. With a seeming unending revenue stream and a future full of more and more garbage, Waste Management should be poised to offer nothing but profit for investors. And here’s the cherry: Waste Management is also the largest recycler in the country which means no matter which way we go with resource management, Waste Management is ready to take advantage of trends as well as political change.
Dominating With Diverse Services and Raw Size
Waste Management has the size and balance sheet to effectively go green, they also retain the pricing power that smaller companies dream of. Besides the fact that Waste Management owns landfills that they rent to smaller waste service companies, they also generate and sell energy from waste, powering homes and turning trash into power, both literally and figuratively.
One reason many people invest in stock is because they can see that the company they are considering provides a service that people will want and need well into the future. Why does Wal-Mart Stores look like a solid investment? Because you can look forward into the future. Imagining the collapse of Wal-Mart is like imagining the collapse of modern society.
For me, the future belongs to Waste Management. I don’t invest in anything that doesn’t have a future, and the longer the future, the better. Barring global catastrophe, Waste Management will always have a willing, possibly desperate, market to go to for continued revenue growth. In fact, even in the case of global catastrophe, I can see Waste Management still running a brisk business.
Long Term Meets Dividends
So the long term investment meets the great dividend investment, and with that you can’t really go wrong. Dividends don’t really pay in the short term, anyway, so without the dependability of a long and profitable future, a dividend feels like no more than a drop in the bucket. You’re better off putting your money into bonds, whose long term dependability rival even trash collectors and recyclers.
For dependability, market flexibility, and long term viability, the trash industry leads the way. Waste Management is at the forefront of that industry and seems to be out-pacing competitors consistently, in a way that can only mean growth will continue. They’ve even acquired some smaller competitors, such as Reliable Environmental Transport, just in the last couple of months. Reliable Environmental caters to some key industries in the tri-state area, with dependable waste streams coming from manufacturers as well as railroad companies and utility companies. Waste Management got a good long term deal in that transaction.
Making Investment Decisions Based on Long Term Dependability
The best part about Waste Management may just be the stock price. At about $35 per share, you can probably make the kind of investment that will matter. With threats to Social Security and other senior services, more and more people are turning to alternative investments to fund their retirement. Waste Management is one of those safe-for-retirement bets that the stock market doesn’t exactly ensure every day. In fact, nothing is certain and even Waste Management may not be an entirely sure bet. But I’m willing to put my money against the possibility of a reduction in waste production.
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