Waste Management: Defensive Business, But Lofty Valuation
Waste Management (WM) is a great defensive business that is built to weather the economic storms that will inevitably arise. Waste Management is the largest waste management business in North America with operations in both the United States and Canada. They provide waste collection, disposal and recycling services to residential, commercial, municipal and industrial customers.
Waste Management has the largest network of landfills which puts them in great position to capitalize from NIMBY while collecting disposal fees for other waste collection services that require use of their landfills. Waste Management has a solid track record of meeting the environmental and sustainability needs of the jurisdictions in which they operate which gives them a leg up on competitors and new entrants that seek to gain approval for new landfills.
The dividend growth strategy is very straightforward and one that made the most sense to me when I began investing my own capital years ago. The strategy boils down to find great businesses that generate plenty of excess cash flow and that have a history of sharing that excess cash flow with investors.
Image by author; data source Waste Management Investor Relations
According to the CCC list, Waste Management has increased dividends for 18 consecutive years giving them the title of Dividend Contender. Waste Management hasn't been the fastest dividend grower; however, the stability of the business has allowed them to give raises even during the worst times for the economy including the Great Recession and more recently the COVID-19 pandemic.