W aste Management ( WM ) is good at finding cash in the trash. The provider of waste collection, disposal and recycling services boasts steady profit and dividend growth.
It’s risen 14% since hitting a low of 45.86 on July 6; the stock has also climbed back above its 50-day and 200-day lines as it shapes the right side of a cup-type base.
For the year, the stock is up 1% and its annualized dividend yield is 3% at the current share price. Both top the S&P 500.
Shares got a boost July 23 when Waste Management reported that Q2 profit rose 12% to 67 cents a share, picking up from the prior quarter’s 9% gain and easily surpassing Wall Street estimates. Revenue for the period slipped 7% to $3.32 billion, but that was an improvement from Q1’s 10% slide.
Cost-cutting initiatives helped offset a $220 million charge from divestitures, a decline in recycling revenue and foreign currency fluctuations.
Waste Management boasts superior earnings stability. Its five-year earnings stability factor is 3 on a scale of 0 (most stable) to 99 (least stable). Profit this year is expected to rise 5% to $2.54 a share, followed by an 8% increase in 2016. Both are roughly in line with the company’s three-year compound profit growth rate of 6%.
Meanwhile, after-tax margin rose to 9.2% last quarter, up from 7.8% a year earlier. Stable profit and rising margins bode well for further dividend increases.
Waste Management’s long-term dividend growth rate is 4%. The company last increased the quarterly payout in the first quarter of this year, up 10 cents, or 2.6%, to 38.5 cents a share. The company has steadily raised its dividend since 2004, increasing it even during the 2008-09 recession.
Also, the stock’s Accumulation/Distribution Rating has gone from a worst-possible E to a robust A- in the past month, indicating strong demand for shares.