Here’s the replay of the Dividend Live where I walked through Waste Management (WM).
The short version: this is a boring business in the best sense. People don’t stop putting out the trash in a recession, the contracts run for years, and WM can raise prices without losing many customers. At $204 it was trading at its lowest earnings multiple in years. I think it’s undervalued, and I’m buying it.
The scorecard:
Moat: Wide and stable. Long municipal contracts plus 257 landfills it owns.
Growth: Average. The industry grows slowly, but Stericycle and renewable gas give it new avenues.
Management: Good. Strong capital returns, mixed record on beating estimates, and a CEO transition to watch.
Risk: Very low. No customer is anywhere near 10% of revenue. The real threat is “diversion,” meaning less waste reaching landfills.
Valuation: Attractive. Around 28.9x earnings and 22.8x free cash flow when we recorded.
We also covered some good questions from chat: how WM’s returns on capital compare with its cost of capital, and why REITs like Realty Income get squeezed when rates rise.
Jump to:
0:00 — The question: Is WM a buy at $204?
0:19 — What Waste Management actually does
3:13 — Financial overview
4:19 — Pricing power and recession resistance
6:36 — The moat: contracts and landfills
7:49 — Growth
8:46 — Management
9:51 — Risks
11:36 — Valuation
13:19 — Reverse DCF sanity check
15:45 — My verdict
16:37 — Q&A: How does WM compare to competitors?
18:13 — Q&A: Returns on invested capital vs. cost of capital
21:27 — Q&A: Realty Income, Moody’s, and interest rates
I scored WM on every factor using Stock Simplifier. You can run it free on 10,000+ stocks at stocksimplifier.com/dave.
Dividend Live happens every Thursday at 10 am ET right here on Substack. Come hang out and bring your questions.
Disclosure: I own or am buying shares of WM. This is education, not financial advice.
I'd look at the 22.8x free cash flow number twice. WM has spent several years on elevated capex for renewable natural gas plants and recycling automation, so as those projects wind down, free cash flow can rise even if earnings only grow at an average pace. Diversion is the piece that could undo that. Less tonnage into landfills means price has to carry more of the load. Did the reverse DCF assume any volume growth?