Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.


A rare opportunity to collect more government cash

A rare opportunity to collect more government cashIf you’re over the age of 18, you’re eligible to collect up to $1,003 a month in extra government cash. That’s not an exaggeration! My research proves that every single person who ever applied to the program I’d like to show you today had the chance to receive a check. Better still, all it took was about 90 seconds of their time and a small membership fee of about $20. Get the details here.


Smells Like Money: High Income from Waste Treatment

By John Persinos on October 3, 2017

The images are upsetting and downright nauseating: toxic mixtures of sewage, chemicals, poisons, garbage, building detritus, smashed vehicles, and human corpses accumulating in city streets and suburban neighborhoods, from Houston to Key West to San Juan. The costs in recent weeks of removing and treating trash from hurricanes Harvey, Irma and Maria already are staggering.

However, these unfortunate events spell growth opportunities for the stocks of waste management and environmental remediation companies. With income investors foremost in mind, I’ve pinpointed two high-quality “green” plays that also pay out strong dividends: Covanta Holding (NYSE: CVA) and Waste Management (NYSE: WM). I examine each stock in detail below.

Particularly riveting in recent days has been the sight of San Juan Mayor Carmen Yulín Cruz, standing waist-deep in swirling rivers of raw sewage and wielding a bull horn, while she directs relief and emergency rescue operations in her ravaged city.

Hurricane Maria was the strongest hurricane to hit Puerto Rico in nearly 100 years. Estimates of the storm’s damage to the island’s already ailing economy range from $45 billion to $95 billion.

At the same time, the Environmental Protection Agency (EPA) and Federal Emergency Management Agency (FEMA) are getting their budgets slashed, staff decimated, and morale undermined. Critics say federal government responses to the environmental crises spawn by the storms have been late and inadequate.

Garbage removal and treatment may not be sexy, but the demand is steady. With the trifecta of hurricanes Harvey, Irma and Maria, the costs of trash pick-up and environmental remediation will run into the hundreds of billions of dollars. That translates into enormous, long-term need for the services of our two dividend plays.

Tailwinds for both Covanta and Waste Management include the ever-growing mounds of refuse that the world is struggling to dispose and recycle. American households, stores, restaurants and other businesses generate about 251 million tons of solid waste every year, according to the most recent statistics available from the EPA.

Every year since 1960, Americans have generated more solid waste than the year before. The amount of trash the country produces has tripled since 1960, while the U.S. population has increased only about 90%. The U.S. disposes enough trash every day to fill 50,000 garbage trucks with 18,000 pounds of trash in each.

Nationwide, the number of active landfills has shrunk from nearly 8,000 in 1988 to fewer than 1,900 today. The U.S. disposes enough trash every day to fill 50,000 garbage trucks, with 18,000 pounds of trash in each.

The search for new methods of disposal is becoming more frantic among federal, state and municipal leaders in the U.S. The problem perplexes global leaders as well. The United Nations estimates that almost 27 billion tons of waste will be generated around the world by 2050 as a consequence of population growth and rapid urbanization.

Cleaning up on garbage…

First, let’s look at high-dividend payer Covanta Holding. Chances are you’ve never heard of Covanta, but it’s hidden gems like these that provide the best investment opportunities.

While income investors flock to the usual suspects — utilities, real estate investment trusts, and master limited partnerships — this under-the-radar waste management firm is currently paying out a hefty dividend yield of 6.73%.

With a market cap of $1.9 billion, Covanta provides waste and energy services to municipalities in the U.S. and Canada. You’ll never hear the preening peacocks on CNBC discuss Covanta, because it’s a small cap operating in a supposedly boring, non-glamorous industry.

Based in New Jersey (no jokes, please), Covanta owns and operates infrastructure for the conversion of waste to energy; it also transports and disposes of waste. Covanta customizes recycling and energy recovery solutions for clients, as an alternative to landfills.

Covanta’s waste-to-energy plants annually burn about 20 million tons of waste from municipalities and businesses, while also generating electricity to power one million homes. Covanta recycles about 500,000 tons of metal each year. The company operates a nationwide network of treatment and recycling facilities, as well as landfills.

Admittedly, second-quarter fiscal 2017 earnings were a bit rocky for Covanta, with adjusted earnings per share coming in at a loss of 22 cents, compared to the same per-share loss in the same quarter a year ago. Investments in expansion projects weighed on earnings. However, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the second quarter was $93 million, an $11 million year-over-year improvement.

With new projects about to go online, the company should renew its growth trajectory. The average analyst expectation is that CVA’s year-over-year earnings growth will reach 187.5% next quarter and 52.8% over the next five years on an annualized basis.

CVA’s price-to-sales ratio (P/S) is 1.1, which is a reassuringly low valuation compared to the average of 2.1 for its industry and the S&P 500. The price-to-cash flow ratio (P/CF) is 7.8, also low compared to 11.9 for its industry and 13.5 for the S&P 500.

Bags of cash…

For a safer income play on waste management, consider global industry leader Waste Management. With a market cap of $34.5 billion, Waste Management is the world’s largest solid waste collection and disposal company.

Houston-based Waste Management also treats and disposes of hazardous and medical waste, as well as operating waste-to-energy and landfill gas-to-energy facilities.

The trash clean-up bill in Waste Management’s home of Houston because of damage from Hurricane Harvey is projected to exceed $200 million, and that’s just one city. Meanwhile, new regulations from global organizations designed to boost environmentally friendly technologies are a boon for transnational players such as Waste Management.

As the largest residential recycler in North America, Waste Management expects to recycle more than 20 million tons in the region every year by 2020, up from the 12 million tons the company handled in 2012.

Waste Management’s services generate a steady cash flow that the company mostly devotes to acquisitions, dividends and share buybacks. The company has consistently paid healthy dividends since 1998.

The average analyst expectation is that Waste Management’s year-over-year earnings growth will come in at 9.2% next quarter and 10.4% over the next five years on an annualized basis. WM sports a current dividend yield of 2.17%. WM’s P/S is 2.5 and its P/CF is 11.6.

Both Covanta and Waste Management are enjoying the highest core prices ever in their commercial, industrial, and landfill businesses. When combined with cost-control initiatives, these price increases are helping to fuel margin expansion.

Trash to cash: it’s an investment alchemy that will continue to work magic for income investors.


You might also enjoy…


Here’s What’s Really Going to Crush the Market

Most folks understand the basic concept of inflation… things cost more money. But tragically, most don’t understand the real implications of what it means for their financial future. 

Or just how dangerous it’s becoming right now. Today.

And there are two reasons for that…

First, the U.S. government’s calculations barely take into account two of the things you and I are paying more and more for every day: energy and food.

Second, since inflation really hasn’t been an issue for the past 30 years here in the U.S., most analysts won’t dare to say it’s on the rise because they’ll suffer professionally. 

But I’ve made a name for myself by always saying what needs to be said. Which is why I’ve prepared a new special report that’ll give you simple instructions on how to protect yourself from the coming storm.

And better still…

It gives you the full story on the six types of investments that are destined to soar 275%… 375%… even up to 575% over the next few years as the winds of inflation flatten the U.S. economy.

You can get your free copy here.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.