Waste Management Inc. (NYSE:WM) is tap dancing in the market weaving a narrative of improved cost control and enhancing yield. Cost control means people lose their jobs. That can only g on for so long. Enhanced yield means raising prices and that has a limited life. Dividend growth is well in excess or revenue and profitability. We all know where that goes sooner than later. Dividend coverage ratios shrink and yield investor get cold feet.
There must be something about operating a fleet of trucks that attracts certain relations. David P Steiner the CEO sits on the board of directors of FedEx. Also sitting on the Waste Management Board is Thomas H. Weidemeyer the former Chief Operating Officer of United Parcel Service. Both FedEx and UPS are hyper competitive and dividends are taken very seriously. So its surprising to see the abuse of dividend in this environment.
Money flow is negative and the uptick/downtick is bearish. Short position continues to accumulate. This is all before considering any environmental issues which for a company with over 500 garbage dumps is always bubbling over. The company exhibits no new technology to process garbage.
Can you smell the steal coming. down and out. Dividend metrics poor. Arrange a leveraged buy out and unlock value. Get rid of that pesky dividend. Leverage up some more debt. Sell off some assets and fix the real problems. In the mean time do some cost cutting but no earning growth on some else’s nickel.
Oldest trick in the book.
George Gutowski writes from a caveat emptor perspective.