Is it a good company at a reasonable price? It is probably a rather stable business to be in. I sold when Waste Connection bought out my Canadian company. I did not want to be holding stock in a US company and I do not regret the decision. I do not generally like to hold companies with very low dividend yields. Even after 10 years of increases, the dividend yield would barely make it into the 2% range. The current price is probably expensive.
I do not own this stock of Waste Connections Inc. (TSX-WCN, NYSE-WCN), but I used to. I first bought this stock in 2007 because TD Securities had a very favorable report on this stock and had it on their action buy list. I had money because I had recently sold RIM. At that time, it was BFI Canada Income Fund. In 2010, I needed to buy something for Pension Account. It was on TD Action Buy List. I sold when it because the target of a reverse takeover by an American company.
When I was updating my spreadsheet, I noticed I am following Progressive Waste Solutions into Waste Connections Inc. These companies amalgamated in 2016. I used to own Progressive Waste Solutions. When I bought Progressive Waste Solutions, the company had a moderate dividend yield (2% to 4%) in the 3% ranges. However, the dividend yields have progressed lower and lower over the years and today, the yield is low (below 2%) and 0.74%. With dividend yields this low, you wonder about calling the company a dividend paying one.
If you had invested in this company in December 2011, $1020.97 you would have bought 37 shares at $27.59 per share. In December 2021, after 10 years you would have received $244.19 in dividends. The stock would be worth $6,378.80. Your total return would have been $6,622.99.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $27.59 | $1,020.97 | 37 | 10 | $244.19 | $6,378.80 | $6,622.99 |
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at just 0.76%. The 5, 10 and historical dividend yields are also low at 0.78%, 0.89% and 1.17%. The dividend growth is moderate (8% to 14% ranges) at around 10% per year over the past 5 years.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2021 is 36% with 5 year coverage at 35%. The DPR for Adjusted Earnings per Share (AEPS) for 2021 is 26% with 5 year coverage at 25%. The DPR for Cash Flow per Share is 12% with 5 year coverage also at 12%. The DPR for Free Cash Flow (FCF) for 2021 is 21% with 5 year coverage also at 21%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2021 is good and low for 2021 at 0.14. The Liquidity Ratio for 2021 is 0.84, but if you add in Cash Flow after dividends, it is 2.04 and this is good. The Debt Ratio is 1.91 and this is good. The Leverage and Debt/Equity Ratios for 2021 are 2.10 and 1.10 and these are also good.
The Total Return per year is shown below for years of 5 to 20 to the end of 2021 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2016 | 5 | 9.56% | 20.52% | 19.68% | 0.85% |
| 2011 | 10 | 11.42% | 21.10% | 20.11% | 0.99% |
| 2006 | 15 | -0.57% | 11.64% | 10.62% | 1.02% |
| 2001 | 20 | 3.60% | 15.84% | 13.44% | 2.41% |
The Total Return per year is shown below for years of 5 to 19 to the end of 2021 in US$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2016 | 5 | 10.83% | 21.93% | 21.07% | 0.86% |
| 2011 | 10 | 9.04% | 18.43% | 17.52% | 0.91% |
| 2006 | 15 | -1.12% | 11.01% | 9.94% | 1.07% |
| 2001 | 20 | 4.81% | 15.66% | 13.22% | 2.44% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 35.59, 40.90 and 46.22. The corresponding 10 year ratios are 27.26, 31.53 and 35.81. The corresponding historical ratios are 20.68, 24.41 and 29.30. The current ratio is 35.09 based on a stock price of $149.57 and EPS estimate for 2022 of $4.29 ($3.27 US$). The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$.
I also have Adjusted Earnings per Share (AEPS) data. The 5 year low, median, and high median Price/Adjusted Earnings per Share Ratios are 26.03, 29.00 and 34.90. The corresponding 10 year ratios are 18.60, 26.23 and 31.29. The current P/AEPS Ratio is 30.53 based on AEPS estimate for 2022 of $3.76 and a stock price of $114.80. The current ratio is between the median and high ratios of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$, but you get the basically the same results with CDN$.
I get a Graham Price of $56.96. The 10 year low, median, and high median Price/Graham Price Ratios are 1.57, 1.91 and 2.24. The current P/GP Ratio is 2.63 based on a stock price of $149.57. The current ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 2.56. The current P/B Ratio is 4.42 based on a stock price of $114.80, Book Value of $6,754M and Book Value of $25.96. This ratio is 73% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$, but you get the basically the same results with CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 13.65. The current ratio is 14.70 based on Cash Flow per Share estimate for 2022 of 7.81, Cash Flow of $2,032M and a stock price of $114.80. The current ratio is 8% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$, but you get the basically the same results with CDN$.
I get an historical median dividend yield of 1.19%. The current dividend yield is 0.80% based on dividends of $0.92 and a stock price of $114.80. The current dividend yield is 33% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$, but you get the basically the same results with CDN$.
I get a 10 year median dividend yield of 0.89%. The current dividend yield is 0.80% based on dividends of $0.92 and a stock price of $114.80. The current dividend yield is 10% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$, but you get the basically the same results with CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 3.42. The current P/S Ratio is 4.23 based on Revenue estimate for 2022 of $7,056M, Revenue per Share of $27.11 and a stock price of $114.80. The current ratio is 24% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$, but you get the basically the same results with CDN$.
Results of stock price testing is that the stock price could be reasonable, but it is probably relatively expensive. The P/S Ratio test says this. The dividend yield test says reasonable and above the median to expensive. Both the P/GP Ratio test and the P/B Ratio test says that the stock is expensive.
When I look at analysts’ recommendations, I find Strong Buy (10), Buy (4), Hold (2), Underperform (1) and Sell (1). The consensus would be a Buy; however, the recommendations are all over the place. The 12 month stock price consensus is $192.77 ($147.89 US$). This implies a total return of 29.69%, with 28.89% from capital gains and 0.80% from dividends. One analyst that says Do not Buy, says that Waste management is not a growth story and can only grow via grow by consolidation. (When there are sell recommendations, I always wonder why.)
Some analysts on Stock Chase thinks that this company is a Top Pick, others say Do Not Buy. Stock Chase gives this company 3 stars out of 5. It is on the Dividend Aristocrat List, but not Money Sense. Rajiv Nanjapla on Motley Fool thinks this is a good stock for the volatile environment. Tony Dong on Motley Fool reviews this stock and feels it is fairly priced. The company has a News Release on it fourth quarter of 2021 results . The company has a News Release on it first quarter of 2022 results. A Simply Wall Street report on Yahoo Finance reviews this stock. Their only risk is that they say the company has a high level of debt.
Waste Connections is the third-largest integrated provider of traditional solid waste and recycling services in the North America. The firm serves residential, commercial, industrial, and energy end markets. Waste Connections entered the Canadian market with its 2016 merger with Progressive Waste. In 2020, 13% of consolidated revenue was generated from the firm's Canadian segment. Its web site is here Waste Connections Inc.
The last stock I wrote about was about was Lassonde Industries Inc (TSX-LAS.A, OTC-LSDAF) ... learn more. The next stock I will write about will be Intertape Polymer Group Inc (TSX-ITP, OTC-ITPOF) ... learn more on Wednesday, June 22, 2022 around 5 pm. Tomorrow on my other blog I will write about Andrew Peller .... learn more on Tuesday, June 21, 2022 around 5 pm.
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