Have you been keeping an eye on Waste Management, Inc.’s (NYSE:WM) upcoming dividend of US$0.51 per share payable on the 22 March 2019? Then you only have 4 days left before the stock starts trading ex-dividend on the 07 March 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Waste Management can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
Check out our latest analysis for Waste Management
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Waste Management fit our criteria?
The current trailing twelve-month payout ratio for the stock is 41%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 43% which, assuming the share price stays the same, leads to a dividend yield of 2.2%. Furthermore, EPS is forecasted to fall to $4.38 in the upcoming year.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of WM it has increased its DPS from $1.16 to $2.05 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
In terms of its peers, Waste Management generates a yield of 2.0%, which is high for Commercial Services stocks but still below the market’s top dividend payers.
Next Steps:
Considering the dividend attributes we analyzed above, Waste Management is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for WM’s future growth? Take a look at our free research report of analyst consensus for WM’s outlook.
- Valuation: What is WM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether WM is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.