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Note: This is the first in the series of our "Top Dividend Stocks for 2012." Over the course of the next several weeks, we will be providing a detailed analysis for each our top picks for 2012.

Parsimony believes that 2012 will be riddled with volatility and uncertainty for equity market investors. Interest rates will remain low due to over indebted balance sheets. Equity market investors should seek equities with stable earnings (and dividends) that will hold up in an uncertain and weak economic environment.

Lakshman Achuthan, the Co-founder of ECRI (video) was on Bloomberg on Friday updating viewers on his recession call. The ECRI continues to call for a recession in the first half of 2012. Due to the strong track record of the ECRI, we think that investors should remain defensive in 2012.

Source: Bianco Research, LLC

Business Overview: Waste Management, Inc. (WM) Founded in 1998 and headquartered in Houston, Texas, Waste Management provides waste management services to residential, commercial, industrial, and municipal customers in North America. The Company offers collection, transfer, recycling and disposal services. The company also owns, develops and operates waste-to-energy and landfill gas-to-energy facilities in the United States. Waste Management’s collection services involve picking up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery facility, or disposal site; and recycling operations include collection and materials processing, plastics materials recycling and commodities recycling.

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Investment Thesis

Waste Management’s scale in collection routes creates an interconnected relationship between haulers and landfills, providing waste for its 300 landfills. The Company operates a stable, annuity-like business model generating revenues from its collection segment with pricing power at landfills.

Our investment thesis for WM is simple; we feel waste management is a very stable business that should continue to increase in line with population growth. Waste Management generates strong free cash flow (EBITDA less capital expenditures) which has provided a stable stream of dividends. The table below outlines the Company's stable operating history over the past two recessions. Comparable Company Analysis As shown in the table below, WM currently trades at a discount to most of its peers. However, we view this as a good buying opportunity for investors as the Company's recent cost-cutting initiatives should result in some modest multiple expansion relative to the waste peer group over the next 6-12 months. Technical Take: The stock has been trading in an upward range the past few months, and we believe that WM will eventually break out of this range to the upside. That said, the stock should get downward support around the $30 area, and we think that investors should consider buying WM on any dips.. Risks to Consider

  • Continued weakening economic environment could lead to greater competitive pressures.
  • Declines in recycled commodities and electricity prices could have an adverse effect on earnings.

Disclosure: I am long WM.

Source: Top Dividend Stocks For 2012: Finding A Treasure In Waste Management