Assessing Dividend Plays in the Trash Industry

Companies in the municipal solid waste sector are well-known for their cash-flow generating prowess and relatively stable operating performance. As outlined in this waste industry primer, a trash-taker's residential collection operations are on a service-based model (not-volume based) and help to mitigate cyclical pressures in other economically-sensitive lines of their business (industrial roll-offs, etc.). Further, cell-by-cell landfill development provides additional flexibility with respect to capital outlays, as rubbish handlers can scale back expenditures during troubled economic times, bolstering free cash flow. Such consistent, cash-rich business models have translated into a nice flow of dividends, particularly at the largest two domestic players, Waste Management (WM) and Republic Services (RSG).[Click to enlarge]With corporate bond yields at relatively unattractive levels compared to other asset classes and concerns about a double-dip recession coming back into vogue -- check out the recent ADP jobs report and ISM manufacturing index -- allocating a portion... Read more