This Utility-Like Play Offers Income and Modest Growth

Heavily-regulated industries tend to be mature, offering little in the way of growth, but most earnings can be given to shareholders as income.

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  • While power generation and telecoms tend to be fairly stable, the next step up the growth chain is that of waste management stocks. Not as regulated as these other industries, they tend to operate as a monopoly or duality in a municipality.

    That provides safety of cash flows, which in turn can translate into steadily growing profits and gradually rising dividends.

    It may also be why analysts are starting to upgrade the space. An economic recovery will likely generate more waste, which is good for these businesses.  With only a handful of players, there are plenty of opportunities.

    Action to take: Waste Connections (WCN) is the big player in Canada, and also has some operations in the United States. Earnings and revenue have been flat in the past year during the pandemic, and shares have underperformed the S&P 500.

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  • Investors may like shares here. While the dividend yield is low at just over 0.7 percent, the company has a history of raising its dividend over time.

    For traders, the current uptrend has left shares at 52-week highs. The June $120 calls would move in-the-money on a further $5 move in shares. Trading for about $1.00, it’s an inexpensive bet that could clean up on a further rally.

     

    Disclosure: The author of this article has no position in the stock mentioned here, and has no intention of starting a position in the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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