Waste Management Turns Trash Into Dividends, Energy

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Waste Management ( WM ) isn't just taking out the trash -- it's turning trash into renewable energy as well as steady earnings and dividends for investors.

On April 24 before the open, the Houston-based garbage hauler reported a first-quarter profit of 49 cents a share, up 23% from the prior year and above views. That marked its best quarterly growth in years. Revenue grew 2% to $3.4 billion, in line with forecasts.

Its three- and five-year Earnings Stability Factor is 2 and 3, respectively, on a scale of 0 (calmest) to 99 (most erratic). Annual profit fell slightly in 2009 and 2012, but otherwise it has increased 3% to 14% since 2004. Analysts expect 9% gains this year and next.

Waste Management in February increased its quarterly dividend to 37.5 cents a share, doubling the amount from 2004. It works out to $1.50 for the year, or a 3.4% yield on an annualized basis, outpacing the S&P 500's 1.9%.

While that payout makes income investors happy, Waste Management's "think green" initiative may appeal to environmentalists. It takes naturally occurring landfill gas from disposal sites and converts it to energy that can power homes and businesses.

In fact, CEO David Steiner last week told CNBC that Waste Management generated 9.82 million megawatt hours (mwh) of energy in 2013. The solar industry produced 9.25 million mwh last year, according to Energy Information Administration data.

The refuse hauler estimates that the renewable energy that it generates from its landfills can power some 1.2 million homes, and aims to produce enough to power more than 2 million homes by 2020. A California plant even converts landfill gas into liquefied natural gas, used to power its trucks in certain areas.

The stock rose 2% in heavy volume after its earnings report, rising above its 200-day moving average to start the right side of a shallow cup base with a potential 46.48 buy point. It's 4% off its high.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: WM

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