A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but bear the brunt of tough market conditions.
We believe that Waste Management, Inc. WM with a long-term earnings per share growth rate of 8.5% and a market cap of $47.9 billion, seems to be a stock that investors should retain in their portfolio for now.
Many companies across diverse sectors have suspended dividend payouts amid the coronavirus crisis. Nevertheless, Waste Management is one of those few players that are staying afloat amid tough economic conditions and maintaining dividend payouts. On May 12, the company announced a quarterly cash dividend of 54 cents payable on Jun 19 to shareholders as of record Jun 5.
Waste Connections has a track record of consistent dividend payouts. It had paid $876 million, $802 million and $750 million in dividends during 2019, 2018 and 2017, respectively.
Strength across the traditional solid waste business supported by accretive acquisitions like that of Anderson Rubbish Disposal and Moorpark Rubbish Disposal continues to benefit the company’s bottom line.
Waste Management’s total debt-to-capital ratio of 0.67 at the end of first-quarter 2020 was higher than the industry's 0.66. The increasing debt-to-capitalization ratio indicates that the proportion of debt to finance the company’s assets is on the rise. Higher debt, as a percentage of total capital, indicates that a company has a higher risk of insolvency.
Further, cash and cash equivalent balance of $3.1 billion at the end of the first quarter was well below the long-term debt level of $13.1 billion, underscoring that the company doesn’t have enough cash to meet this debt burden. The cash level, however, can meet the short-term debt of $387 million.
Waste Management, Inc. Revenue (TTM)
Waste Management, Inc. revenue-ttm | Waste Management, Inc. Quote
Zacks Rank and Stocks to Consider
Waste Management currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader Zacks Business Services sector are Elastic N.V. ESTC, SailPoint Technologies Holdings, Inc. SAIL and SPS Commerce, Inc. SPSC. Elastic N.V. sports a Zacks #1 Rank (Strong Buy), while SailPoint Technologies and SPS Commerce carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings (three to five years) growth rate for Elastic, SailPoint Technologies and SPS Commerce is estimated at 25.9%, 15% and 15%, respectively.
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