Garbage Greatness

Waste Management (NYSE: WM) owns a network of garbagecollection routes, waste processing facilities and landfills that would be hard, if not impossible, to replicate. The business is based on long-term contracts to supply a service that is essentially a modern necessity. Economic ups and downs can have an impact on the company, but the need for trash disposal isn’t going away anytime soon. It’s close to impossible for new companies to enter this heavily regulated industry, and the generally low-margin business benefits from economies of scale. As the nation’s largest trash hauler, Waste Management is in a position to keep anyone from encroaching on its turf for many years to come. Along with its durable business, Waste Management also has a talented management team. Even though it’s in a relatively slowgrowth industry, management has been hyper-focused on costs and has been increasing per-share profits via a hefty dose of share repurchases. As a result, this seemingly boring business is cranking out strong returns on equity on a regular basis. The company does carry a lot of debt, in part due to the capital-intensive nature of its business, but it also earns enough to manage it. Waste Management’s dividend recently yielded about 2 percent, and its payout has been increased annually for 15 consecutive years. The stock is worth consideration as a long-term holding.