If It’s a Dirty Job, It’s Probably Profitable For Your Portfolio

Utility companies tend to offer steady returns, but at a cost. Growth is limited, thanks to regulatory concerns. However, some utilities can fare better than others, either because they’re in growing markets, or because they face less regulatory scrutiny.

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  • One such area is in waste management, aka, garbage hauling. This service is often provided to municipalities by an oligopoly of companies. These companies are able to earn reasonable returns, particularly for patient investors.

    The biggest player in the space is Waste Management (WM). It’s up 7 percent over the past year. Compared to the market’s losses, it’s faring quite well.

    And like other companies in the industry, it’s growing its revenues over time. Part of that is thanks to long-term contracts that adjust higher for inflation.

    Action to take: Shares are fairly valued around 25 times earnings, however, that’s down from 40 times earnings a year ago. The company’s positioning will allow it to earn steadily growing income indefinitely. Plus, shares yield about 1.8 percent here, and WM has a history of growing its dividend.

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  • For traders, the stock has been somewhat rangebound, but is closer to the lower point of its range. The April $165 calls, last going for about $1.00, are a bet on a bounce higher in the coming months.


    Disclosure: The author of this article has a position in the company mentioned here, but does not intend trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.