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This Dividend Stock Has Tripled Its Payout Over the Past 17 Years

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This isn't the highest-yielding stock, but could still be worth a closer look.

Don't underestimate the long-term compounding power of a rock-solid company with a steadily growing dividend like Waste Management (WM 0.07%). In this Fool Live clip, recorded on Oct. 25, contributors Jon Quast and Jason Hall discuss why income-seeking investors might want to put Waste Management on their radar. 

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Jon Quast: One of the things that I like about Waste Management is just how rock solid its core business is. When you think about the need to have trash removed and dealt with, is there anything more predictable in life? I mean, we fill up a trash can all the time at my house and that is never going to change in our life I don't think.

Waste Management's core business is really intact. It's a solidly profitable company and it's one that management has really good expectations on what's going to happen. They can really plan ahead and really manage that business well. I'll just share a couple of stats real quick. We're not going too deep here, just keeping time in mind. But this is typically a single-digit growth company.

Most recently, here it's revised its outlook up. It's expecting revenue growth this year, 2021 to be between 15.5% and 16%. That's actually pretty good for this company on a year-over-year basis. Now some of this is being propelled forward catalyzed by acquisitions. I think it has something in the ballpark of 25% of the market share when it comes to landfills in the United States is able to increase that market share with a recent acquisition and why can it make an acquisition? Because it's expecting between $2.5 billion and $2.6 billion in free cash flow this year.

Anytime you have a business that's throwing off those kinds of free cash flows, it's really hard to bet against it. The dividend yield 1.4% roughly paying out 59% of its earnings right now. It's had a solid history of growing that, nothing game-changing here, this is over the last five years, 40% dividend growth. You see it just stepping up gradually over time. It's a slow and steady business. It's rock-solid as far as its need in the world. So that's why I have it ranked as high as I do.

Jason Hall: I'm going to just share another chart real quick. If you stretch back to 2004, which is really when it implemented its regular dividend policy, dividend's up 207%. It was not just a five-year story. This is basically 15 years, little bit of earnings growth, a little bit of operational improvement, ringing it out, and then passing that excess earnings growth onto investors.

Matthew Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool recommends Waste Management. The Motley Fool has a disclosure policy.

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