Rubbish has an impressive attendance record. Households keep putting bins out, and businesses still need collection even when the economy isn’t feeling ambitious. Owning part of that service can be attractive for a 10-year account. The investment gets less straightforward when everyone else has already noticed. I’d want the business to keep earning more, with a purchase price that leaves me a fair share of that progress.
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A route worth owning
Waste Connections (TSX: WCN) collects, transfers, and disposes of waste across North America. Its attraction includes local route density, which means serving more customers without driving much further and disposal assets that competitors can’t easily recreate. Those advantages can help keep costs under control and support pricing.
Acquisitions add another growth route. A smaller operator can become more profitable within a larger network if routes, purchasing, and disposal are managed well. I’d pay for that repeatable improvement, while remembering that buying a company only creates value when the price and integration work out.
For a Tax-Free Savings Account (TFSA) investor, the goal is capital growth with less dependence on a fashionable product. Customers aren’t choosing a waste provider because it has the latest technology announcement. They’re paying for a service that needs to happen reliably, which gives management a recurring business to improve.
The quarter showed pricing at work
Third-quarter adjusted operating earnings before interest, taxes, and non-cash depreciation represented 34% of revenue. This margin shows how much remained after the operating costs captured in that measure. Holding it up despite higher diesel prices supports the case that pricing and efficiency can protect profits when costs rise.
Management raised its full-year outlook again and expected at least US$1.4 billion in adjusted free cash flow. That’s cash remaining after the company’s defined adjustments and capital spending. It can fund acquisitions, dividends, and repurchases without every growth decision requiring another trip to shareholders for money.
I’d judge future quarters on whether those cash earnings continue expanding per share. Higher sales from acquisitions can look impressive while debt or additional shares absorb the benefit. The shareholder gets paid by owning a more profitable slice, not simply a larger rubbish-collection empire.
A raise and a smaller share count
The company raised its quarterly dividend 10% to US$0.385, its sixteenth consecutive double-digit annual increase. The percentage sounds generous, but the payment starts small. It annualizes to US$1.54, so this remains a growth investment rather than a way to fund large bills today.
Repurchases also reduced the weighted-average diluted share count used in the quarterly earnings calculation. The figures below aren’t shares repurchased during the quarter. They show how many shares the profit was spread across on average.
| PERIOD | AVERAGE DILUTED SHARES |
|---|---|
| Third quarter 2025 | 257.6 million |
| Third quarter 2026 | 251.9 million |
That’s about 2.2% fewer shares. When earnings grow and the share count falls, each remaining share can receive a larger share of the profit. Paying a sensible repurchase price is essential, just as it is for my own purchase.
Price matters
At the recent close of $261.15, the current forward earnings sat at roughly 31. That means paying about $31 for each dollar of estimated future annual profit. Those estimates can change, and the valuation already assumes a strong business keeps performing.
I’d therefore start small rather than put an entire TFSA contribution into the stock at once. A slower economy can hurt commercial waste volumes, while acquisition integration, labour costs, and disposal obligations can pressure cash flow. The recurring service reduces some business uncertainty without removing price risk.
Bottom line
I’d buy Waste Connections gradually for a 10-year TFSA, with sufficient room and other industries alongside it. I’d reinvest the small dividend and let operations and repurchases build value per share. Among Canadian-listed stocks, this is a business I’d give time to compound, while keeping the price I pay firmly in the decision.
