Bill Miller seems befuddled. In his July 2010 commentary, he wonders why investors keep purchasing 10-year treasuries yielding about 3%, when companies like ExxonMobil offer much higher potential returns.

His formula for Exxon is straightforward: "A sum of the dividend yield, growth rate and share shrink could represent an attractive annual return even if the valuation stays the same, and the valuation is among the lowest the company has traded at in years." When you add up the components, Exxon could offer 16.4% returns per year in a low-return environment.

I'm no less baffled than Miller by investors' preference for bonds, but I do think he's on to something. To see whether more Miller-like opportunities like Exxon were out there, I looked for companies with:

  • A dividend yield greater than the 3% 10-year treasury yield
  • A five-year track record of dividend growth
  • A history of repurchasing shares
  • A P/E less than 25

Here's what I found:



5-Yr Div. Growth

Share Shrink


Waste Management (NYSE: WM)





Republic Services (NYSE: RSG)










Source: Capital IQ, a division of Standard & Poor's.

From the table above, Waste Management fits Miller's criteria perfectly. It pays a 3.6% dividend that has been growing 9.5%, on average, for the past five years. The company also trades at 16.6 times earnings and produces plenty of cash flow to repurchase shares. Competitors Republic Services and IESI-BFC do not meet all of the criteria for our exercise.

The Foolish bottom line
Would Bill Miller consider investing in Waste Management? It meets all the criteria above, and it could offer a 15.3% return over time -- although it will be a challenge for the company to maintain such a dividend growth rate. Even so, in today's low-return environment, that's pretty attractive. I don't know why the market is offering up this opportunity, but as long as it is, Waste Management could be worth pursuing further.