Waste Management (WM -0.20%) takes care of the unglamorous job of collecting the trash. It's one of those things that has to be done regardless of what's going on in the world or on Wall Street. But this fact alone isn't enough to make a stock a buy.

Here are four things to consider before you jump aboard Waste Management.

1. Waste Management is a highly reliable business

The coronavirus pandemic turned 2020 into a very difficult year for a lot of companies, but Waste Management's business held up exceptionally well. Its top line fell a scant 1.5%, with adjusted operating EBITDA off by 1.4%. Given the health headwinds, that's pretty solid performance. However, it's worth noting that revenue and adjusted EBITDA were both slightly higher year over year in the fourth quarter, up 5.4% and 1.8%, respectively. So results improved as 2020 progressed.   

A garbage truck dumping a trash bin.

Image source: Getty Images.

To be fair, earnings were lower in the fourth quarter and for the full year, but Waste Management's business held up strong. This is what you would expect, given that it collects garbage -- something that has to be done regardless of the issues facing the world.

With regard to the year-over-year earnings declines, meanwhile, it's worth noting that the company offered pricing concessions to some customers during the early stages of the pandemic, purposely hampering its bottom line to support valued partners. That's just good business, even if it did have a negative near-term effect. All in all, given the situation, 2020 was a decent year and proves the resilience of Waste Management's business.

2. Waste Management has irreplaceable assets

One key thing that shouldn't be overlooked about Waste Management is the scale of its business. It is a giant $15 billion in revenue company serving some 20 million customers. Underpinning that is a massive fleet of trucks and facilities, including 244 solid waste landfills and five hazardous waste landfills.

Just about anyone can buy a garbage truck or an industrial property, but a landfill is a different story. Landfills are highly regulated assets and very few people want a new one built in their backyard. Owning landfills gives Waste Management someplace to put the trash it collects and allows it to charge competitors who deposit their collections in these facilities, as well. It is a durable competitive advantage.   

3. Waste Management is returning value to shareholders

Waste Management has increased its dividend annually for 17 consecutive years, including an increase in 2020. That shows a material commitment to shareholders and should interest those with a dividend investment focus.

Meanwhile, over the past decade, the average annualized increase in the dividend was a decent 5.5% or so. That's more than enough to offset the historical effect of inflation and, thus, increase the buying power of the dividend over time. Basically, Waste Management is a slow and steady performer with a resilient and differentiated business. So far so good.  

4. Waste Management has a small problem

The question here, however, isn't whether or not Waste Management is a good company. That's important (and it is), but the choice to buy a stock also needs to include a look at valuation. Paying too much for a good company can turn it into a bad investment. This is where the problem lies.

WM Chart

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Starting with dividends, which can be used as a simple valuation tool, Waste Management's yield is a slim 1.9% today. That is more than the 1.5% or so investors would get from an S&P 500 Index fund, but not a particularly huge number on an absolute level. Those looking to maximize current income won't likely be attracted to Waste Management. More notable, however, is that the stock's dividend yield is near its lowest levels of the past decade. That suggests that the stock is richly valued right now.

That assessment is confirmed by the fact that Waste Management's price-to-sales, price-to-earnings, price-to-cash-flow, and price-to-book-value ratios are all above their five-year averages. In fact, some of these metrics are notably higher than their longer-term averages, which means that value-conscious types will probably shy away from Waste Management. And as noted above, this is a slow and steady tortoise of a company, not a fast-growing technology stock, which means that growth investors will likely want to avoid it as well.  

The wrong time to buy

There are a lot of things to like about Waste Management's business, but that alone isn't enough to make its stock worth buying. Indeed, once you step back and examine the valuation here, it looks like most investors will be better off on the sidelines right now. Still, keeping Waste Management on the wish list wouldn't be a bad call, given the resilience of its business even during hard times, just in case there's a notable market sell-off.