Waste Management, Inc. (WM) may not be in the sexiest business. But aside from the subject matter, the stock is usually a very alluring choice. And given the wild gyrations of the markets in recent months, this is a stock that will keep you cool, calm and collected no matter what is happening to the broad market.
The fact is, WM is attractive because of how well it performs, quarter after quarter. And with a solid 2.8% dividend yield, it will pay you regardless of market conditions.
And, while it might not seem like the kind of company that is a strong grower, you may be surprised to know that while the S&P 500 is underwater year to date, WM is up almost 10%.
WM Stock in a Great Position
Like owning a utility, the strength of WM is based on the simple concept of demand. It operates through local subsidiaries that derive most of their revenue from collecting, recycling and disposing of residential, commercial and industrial waste. It has 21 million customers in the U.S. and Canada and handles more than 15 million tons of residential recycling every year.
It also has a division that uses the landfill gas to create electricity. In 2014, it had 134 of these operations running, supplying enough energy to power 500,000 homes.
The point is, there is little doubt that there will be more trash as the population grows, and WM is in a unique position to take advantage.
Because of its sheer size, it finds a niche in every market it enters. If there are local residential services, it can provide operations for a municipality or local industry. And many cities and towns are still struggling with managing their infrastructure on tight budgets. Outsourcing trash services can be a very attractive option.
What’s more, Waste Management stock’s potential competitors have an enormous barrier to entry. There are not many companies that would think about going after WM’s market because its North American exposure is so pervasive.
Its numbers from its most recent quarter, released in mid-February, were testament to WM’s continued dominance and steady growth as the broad stock market searches for a footing.
Adjusted income for the quarter was $320 million, or 71 cents per diluted share. That is a nice bump from the same quarter last year, when Waste Management stock saw adjusted income of $278M, or 60 cents per diluted share. Free cash flow was up more than 20%.
Bottom Line for Waste Management Stock
Generally speaking, there are stocks that outperform in slow-growth markets and some that outperform in fast-growth markets. WM is certainly in the former category, and that is just the environment that will last at least for another year or so.
And because of WM’s dominance in its industry, it will be a winner whether the economy is ice cold or boiling hot.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.
