Waste Connections (TSX: WCN)(NYSE: WCN) is an interesting investment option to consider adding to your portfolio, and the company checks off many of the boxes that investors often look out for when evaluating several companies as viable long-term investments.
Let’s take a moment to talk about what Waste Connections offers and just how intriguing an investment that it could be to your portfolio.
Meet Waste Connections
For those that are unaware, Waste Connections provides waste collection, transfer, disposal, and recycling services to over six million residential, commercial and industrial customers across a growing network of markets scattered across five province and 39 states.
As an investment option, there are actually three compelling reasons why investors should consider investing in Waste Connections.
First and foremost, there’s the business itself. Disposing of garbage is a messy business, but it is one that is a necessity in our world and just as important as (if not arguably more important) providing basic power and water utility services. To be blunt, there are many things we can do without on a daily basis, but homes and businesses will still generate garbage, and a company like Waste Connections will always be needed to collect and dispose of it.
Adding to that is the fact that Waste Connections has completed a number of well-executed acquisitions over the years, which has helped establish Waste Connections as one of the three largest companies in North America for waste collection and disposal.
Second, let’s talk results. The necessary, growing, and recurring nature of the waste business noted above provides a window of opportunity for a well-run business to generate substantial earnings, and Waste Connections fits that description perfectly. In the most recent quarter, Waste Connection reported $1.25 billion in revenue, which was a noted improvement over the $1.14 billion reported in the same period last year. In a similar vein, adjusted net income came in at $163.9 million, or $0.48 per share, in the most recent quarter, while adjusted free cash flow came in at $246 million for the quarter.
Finally, let’s take a look at Waste Connections dividend. While the paltry 0.72% yield is hardly a compelling reason on its own to consider the stock, the dividend has seen impressive upticks in the past — most recently a 14% hike last year. In other words, the current yield is more likely a victim of the impressive growth we’ve witnessed from the stock rather than any perceived weakness. There’s little reason to doubt that Waste Connections will not provide additional dividend hikes and drive up the yield.
