1 Dividend Stock With a Spotless Reputation

In today's video, I look at Waste Management and explain why I'm giving the stock a outperform rating on my profile in Motley Fool CAPS. Waste Management is the largest trash and environmental services business in the U.S. Even in a down economy, garbage needs to be disposed of, which gives Waste Management an edge over businesses in other industries. Additionally, the company's waste-to-energy operations create enough renewable energy each year to power more than 1 million homes.  

Investors craving strong returns will find no shortage of reasons to love Waste Management. The company pays an annual dividend of $1.42 per share and boasts an impressive dividend yield of 4.3%, which is a full percentage point above its closest competitor, Republic Services. Also, even under tough economic conditions, both Waste Management and Republic Services were able to grow their dividends.

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Fool contributor Tamara Rutter does not own any stocks mentioned in this video. Follow her on Twitter using the handle @TamaraRutter for weekly stock picks and other Foolish insights. The Motley Fool owns shares of Waste Management. Motley Fool newsletter services have recommended buying shares of Waste Management and Republic Services, as well as writing a covered strangle position in Waste Management. The Motley Fool has a disclosure policy.

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Read/Post Comments (2) | Recommend This Article (6)

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  • Report this Comment On May 24, 2012, at 2:40 PM, JohnCLeven wrote:

    I believe it will underperform the market in the long run, only outperforming in the short/medium run if we get another crash/recession. Both WM's OCF and FCF annual growth rates over the past 7 years have been ZERO. ROIC has been droped each of the past 5 consecutive years from 8.1 in 2007 to 6.2 in 2011. The P/E is 16, which is pretty pricey for a company with zero growth. Debt/equity is also a dangerous 1.5. Shareholder value is increasing only by buybacks (avg 2% annually this decade) and high dividends of a about 4%. Let's just say this company is fairly valued (best case senario), that would imply about a 6% return annually. Personally, I see today's fair value closer to 27. That would imply a mere 2.5% annual return over the next 5 years, which I believe the the S&P will beat. But who knows? I'm just a 22 year old history major and you're writing investing articles. Perhaps you'll be right.

  • Report this Comment On May 25, 2012, at 12:25 PM, SteinwayB731 wrote:

    All this numbers stuff is fine, although of frankly dubious value. More to the point from a long-term perspective, I had heard rumors of a WM joint venture with Shanghai Environmental group (Bing lists an MSN money url which leads nowhere), and a general push by WM into China markets. If you've ever been to China, you know they've got a problem with managing waste streams, so JV's there could have significant upside. Anybody know anything about this?

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Related Tickers

12/19/2014 4:11 PM
WM $50.78 Down -0.08 -0.16%
Waste Management CAPS Rating: *****
RSG $40.26 Down -0.20 -0.49%
Republic Services CAPS Rating: *****

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