Waste Management Inc. (NYSE: WM) has gotten some media attention in the past month due to its over-12% returns — they're not garbage. (See what we did there?) While in a comparatively ho-hum business, it's still a staple. People need to do something with their trash.
Waste Management Inc. offers waste management services throughout the U.S. and Canada, including the collection, disposal, recycling of waste and more. The company offers services to a wide number of customers, including residential, commercial and municipal customers.
In Q2, Waste Management Inc. had strong organic revenue growth and an increase in adjusted operating EBITDA. The company also offers a sizable dividend including a dividend increase track record of 18 years, an annual dividend of $2.60, a dividend yield of 1.50% and a dividend payout ratio of 50.78%.
Let's walk through the pros and cons of Waste Management Inc. as well as some facts about the company in order to decide whether it's a positive dividend value-add to your portfolio.
About Waste Management Inc.
How did Waste Management Inc. get started? In 1893, founder Harm Huizenga began charging for waste collection by simply driving around and collecting waste with a wagon. By 1982, Waste Management Inc. had achieved $1 billion in sales by not only carting away waste but also managing landfills and being a frontrunner in the recycling movement.
Today, Waste Management Inc. offers waste management environmental services, which includes the following solutions:
- Waste pickup
- Waste transportation
- Picking up recyclable materials
- Operating landfill gas-to-energy facilities
- Owning and operating transfer stations
- Solid waste landfills
- Hazardous waste landfills
- Transfer stations
- Materials processing
- Commodities recycling services
- Recycling brokerage services
- Recyclable materials
- Construction and remediation services
- Consulting services
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Pros and Cons of Investing in Waste Management Inc.
How do you choose the waste management stocks for your portfolio? Let's take a look at the pros and cons.
Let's take a look at the pros of investing in Waste Management Inc. first.
- Definite revenue stream: Waste management has growth attributes that may encourage you to invest in this particular market. The global waste management market was valued at $993.4 billion in 2022 and should increase to around 1,782.5 billion by 2030, according to Precedence Research. From 2022 to 2030, it is growing at a compound annual growth rate (CAGR) of 6.71%. In Q2 2022, the company increased its overall revenue 12.3% year over year.
- Scale: Waste Management Inc. has expanded more than any other business in the waste collection and disposal industry. The company has 260 landfills, over 15,000 collection routes and 96 recycling facilities.
- On track to become a Dividend Aristocrat: Waste Management Inc. has raised its dividend every year for 19 years in a row, which puts it on track to go on the list of the Dividend Aristocrats. Dividend Aristocrats as a whole have increased their dividends for 25 consecutive years.
- Share appreciation: The share price has increased over the past year, as well as gaining 0.97% over the past month, compared to the Business Services sector loss of 3.38% and the S&P 500's 1.14% loss. Analysts suggest that 12-month price forecasts for Waste Management Inc. have a median target of 170.00, with a high estimate of 198.00 and on the low end, 163.00.
- Driver of ongoing trends: An environmental leader, Waste Management Inc. has increased its environmental offerings and has continually decreased its environmental impact, starting from the ground up by ensuring that the landfill base offers stability to the landfill and that the company prompts methane gas to be converted into renewable energy. The company can appeal to environmental, social, governance (ESG) investors due to its positive implementation of processes and technologies that meet environmental safety and sustainability goals.
What are the downsides of investing in Waste Management Inc.? Let's take a look at some reasons you may want to consider putting Waste Management Inc. on the backburner?
- Regulations: Landfill companies like Waste Management have to adhere considerably more than just a small soupçon of federal, state and local regulations. They must also consider environmental, health, safety, transportation, zoning and more. However, regulation could also work further in Waste Management's favor because oil and gas exploration companies as well as renewable energy regulations may leave a gap between transport and disposal of certain materials.
- Stakeholder and ESG challenges: Increased interest in environmentalism and ESG requirements may eliminate many investors from choosing to invest in waste altogether. Landfills have a negative connotation, therefore companies like Waste Management Inc. may not be not high on investors' priority lists. However, the trends in waste management have evolved considerably and technology has improved the ways in which landfill waste can be recycled and dealt with.
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Is the Company Waste Management Inc. a Viable Dividend Option?
The world has latched onto new ways to avoid waste and companies have also done a lot to produce recyclable packaging. U.S. landfill capacity should decrease 15% over the next five years. However, the need for waste management isn't going away, and you may want to sink your funds into this profitable and operationally successful company that has considerable operations across the country.
Due to its revenue stream and future value, company scale, pumped-up dividends, share appreciation and ability to think outside the box as an environmental leader, Waste Management Inc. might appeal to portfolio requirements. However, regulations and universal appeal may hurt the company based on the very nature of the company itself.
Before you make a final decision about whether you should add Waste Management Inc. to your portfolio, consider your other holdings, your risk tolerance, investment goals and other specific needs. Despite Waste Management Inc.'s recent positive trajectory, also consider how much you have to invest and never invest more money than you can afford to lose.
Companies Mentioned in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|Waste Management (WM)||$164.96||+1.3%||1.70%||30.21||Moderate Buy||$176.64|