Wednesday, October 3, 2012

Waste Management Inc. (Getting paid to wait)

Waste Mangement Inc. (WM)

As a dividend stock investor when I buy a company’s stock I usually look to hold it for a long period of time. I don’t mind waiting if I am getting paid a dividend while I wait. I currently own Waste Management Inc. (WM) and will take a look if adding more at current prices. This can also be a guide for someone new looking for a solid company and doesn’t mind being paid a dividend while waiting for margins to improve.

The company currently has a yield of 4.5% making it look attractive for an investor. Taking a look at the last five years a $1000 investment today would be worth $955.80 or an annualized ROR of -1.2%. Taken dividends into account the amount would be $1,091.31 or 2.4% annualized ROR. This shows the importance of dividends and purchasing a stock at the correct time. During this time the P/E ratio has been 16.4 and is currently 14.8. The average dividend growth during this time is 4.5%. This company will never be a high growth stock. I don’t expect any problem with the company maintaining its dividend even with its current payout ratio of 72%. The estimated EPS is 2.15 and if the company were to maintain its payout ratio or a 70% payout ratio the current dividend would be raised from 1.42 a share to 1.50 a share. The 70% is at the high end I would like to see a dividend growth stock.

Many people take short term view of the market and companies. When quarter earnings do not meet expectations the stock will suffer. Looking at WM’s second quarter earnings call this may have been an overreaction. The company had a negative $0.03 a share due to electricity prices. And in the first half of the year had headwinds in recycling and waste-to-energy this is also predicted for the second half of the year with another $0.07 a share revision. Management expects this to improve as commodity prices rise. The company is also moving there fleet of vehicles to CNG which will help other expenses as well the environment. The full year guidance is still $2.15 to $2.20. This could also change through the year and the next earnings call is 10-30-2012. It is a positive that management is looking to the future and is working on the problems.

A few future positives could be in the housing sector recovery. WM can benefit from opportunities with more residential customers and disposal for construction and other jobs. The 10 year Treasury note is under 2% compared the 4.5% current yield. The company will have a floor as the dividend rises, more people will keep it from falling to far in my view. What are your views? Does WM deserve consideration moving forward?

Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing.

Tuesday, October 2, 2012

Update month September month 6

The "Project Portfolio"

Monthly Update: September


Investing Account
Starting Balance -- $9053.06

Deposit -- $0
Dividends -- $39.22
Net Gain or Loss -- ($4.30
)
Realized Gain or Loss -- $214.50
Ending Balance -- $9048.76
August Starting Balance -- $9048.76


Stock Shares and Dividend Update
This month there was many dividends from WM, MCD, ABX, MSFT, ERF, and WAG. The year to date dividends payments are $121.68 which is 1.3% of the total money in the investment account. The average payment per month is $10.14 with estimate full year at $22.55.
 

Thoughts

As I mentioned last month both MCD and MSFT raised there dividends. I am looking at adding more WM as I think the company is being ignored. The company is a longer term hold but it will pay us to wait. The current yield is moving toward 4.5% and I expect a raise after the next payout. The company has had some headwinds with its earnings per share hit with commodity prices and the recycling not making as much because of the economy. The company is also moving its whole fleet to CNG natural gas this will help with fuel expenses and the environment. The payout ratio is high at 72% but I don't think the dividend is at risk. The earnings are projected at 2.10 to 2.15. If the dividend payout moves to a 70% payout ratio and the earnings move to 2.15 the dividend can still be raised .08 or .02 a quarter. This payout ratio is high but like I mentioned I think it is temporary.



Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing.

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