Turn Trash To Cash With Dividend Paying Waste Management Companies

 |  Includes: RSG, WCN, WM
by: Zvi Bar

Indeed, one person's trash is another person's treasure. Garbage is in many ways a quasi-commodity that is made of multiple other commodities. These days, around the world, it is commonplace for people to scavenge through garbage for old computer and other electronic components for the minimal amount of valuable metal inside, or for larger pieces of junk metal.

For example, aluminum is a commodity that is abundant in consumer products and found throughout garbage dumps. Aluminum is also a commonly recycled resource. Slowly, other types of trash will become more valuable. Already, between five and ten percent of global oil production is distilled and turned into plastics, which are now used in many products. This has resulted in a high and growing plastic content of garbage. Over time, and especially if oil increases in price, garbage may be looked to as a greater source of recyclable plastic and similar raw materials.

As the value of oil, aluminum and other elements ubiquitous within trash increases, the depths to which trash shall be filtered will only increase. Beyond the growing global demand for commodities and the potential for increasing natural resource prices, new green initiatives also appear likely to support further recycling and garbage dump minimization initiatives. Municipalities and communities will likely introduce more ecologically friendly waste practices as time goes on. They will also likely place further pre-sorting requirements upon residences and commercial locations that will more easily facilitate those endeavors.

All of this appears likely to benefit the companies that collect, sort and maintain trash. Many of the publicly traded companies in this business are of significant size, and tend to acquire smaller businesses that identify new trash opportunities. The industry is also beloved for generally having strong cash-flows and dividends.

The largest and best known name in waste management within the United States is the well-named Waste Management, Inc. (NYSE:WM), which currently has a market valuation of $15.48 billion and a yield of 4.3 percent. The company raised its quarterly dividend from 34 to 36 cents at the start of 2012. Shares in WM are up 2.26 percent year-to-date, but have declined 10.9 percent over the last 12 months. See a recent performance chart for WM:

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The second largest waste management company is Republic Services, Inc. (NYSE:RSG), which currently has a market valuation of $9.66 billion and a yield of 3.3 percent. Shares in RSG are down 5.26 percent year-to-date and have declined 16.1 percent over the last 12 months. Republic Services has maintained a 22-cent dividend for the past four quarters, after paying twenty cents per quarter for four quarters, so it may be due for another increase. This is no certainty, as RSG had maintained a 19-cent dividend for eight quarters before that, though that period includes the financial crisis of 2008 and 2009. See a recent performance chart for RSG:

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The third largest waste management company is Waste Connections Inc. (NYSE:WCN), though both are considerably smaller. WCN is $3.7 billion market cap and a 1.2 percent yield. WCN has declined by 9.3 percent year-to-date and 6.65 percent over the last twelve months. Waste Connections has paid a 9-cent dividend for the last three quarters, after paying 7.5 cents for the prior four quarters. See a recent performance chart for WCN: (click to enlarge)Click to enlarge

The fourth largest waste management company is Progressive Waste Solutions Ltd. (BIN), which has a $2.2 billion market cap and a 2.9 percent yield. Progressive Waste Solutions has declined by 2.76 percent year-to-date and 24.16 percent over the last twelve months. BIN has paid a 14-cent dividend for the last two quarters, after paying a 12.5-cent quarterly dividend since its IPO in mid-2009. See a recent performance chart for BIN: (click to enlarge)Click to enlarge

This waste management industry is all too often overlooked, like so much trash that one may pass by on a daily basis. Further, beyond the need to better handle and recycle refuse, any substantive turnaround in domestic construction will also signal a major growth cycle for these businesses. Construction generates a large amount of trash, requiring construction companies to employ these waste management companies.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.