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Instant Analysis: Waste Management Raises Its Dividend by 6%

By Eric Volkman - Mar 2, 2016 at 11:05AM

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The company adds a few pennies to its quarterly payout, for a total of $0.41 per share.

What happened?
One person's trash is another's treasure. For top garbage-hauler Waste Management (WM 1.75%), trash also means a dividend. The company, which habitually pays one on a quarterly basis, has enacted the latest in a long string of annual raises. It will hand out $0.41 per share, 6% higher than previously.

IMAGE SOURCE: JEFFREY BEALL VIA FLICKR.

Since switching from an annual to a quarterly payout schedule at the beginning of 2004, Waste Management has steadily raised its dividend to the present level.

Waste Management's upcoming payout will be dispensed on March 18 to stockholders of record as of March 7. At the most-recent closing share price, it yields 2.9%, beating the 2.2% average of stocks on the S&P 500 index.

Does it matter?
Not overwhelmingly, although it might be looked at as a slightly negative development by pessimists. After all, Q4 saw Waste Management booked a sturdy 15% year-over-year improvement in adjusted net income, to $320 million, on revenue that drooped by 6%, to $3.3 billion.

The company's strong pricing discipline helped boost profits, as did helpful developments like cheaper gas for the company's vehicles. That helped shore up profitability against revenue-sapping negatives such as the strengthened U.S. dollar, and the effect of weakened commodity prices.

The higher bottom line also grew the company's free cash flow by nearly $100 million, to almost $1.3 billion. With those positives, shouldn't Waste Management have upped its dividend a little more?

I would say no. The commodities price decline has bite, and there's no telling when the market will wriggle out of its grip. We might also say the same for gas prices.

This year, Waste Management's typically modest annual raise is appropriate in the face of such uncertainty... and it probably won't be the most exciting, price-moving piece of news for the company's investors.

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