Waste Management, Inc. (WM)

dhd1491 (96.85) Submitted: 5/6/2009 4:48:21 PM : Start Price: $26.05 WM Score: +5.07

Trash will be with us always; so WMI's revenue stream is inherently safe, forever. It can't even be threatened by cheap foreign imports (landfills are really difficult to move).

The business is capital-intensive, which is a double-edged sword, of course. It provides a barrier to entry (good) but incremental growth is expensive (bad). In this type of business, you want economies of scale on your side, which WMI has in spades. They spend a lot on branding, which I'm not convinced is all that worthwhile in their business, but so be it. That's always something they can tweak each Q to make their numbers. They've always got their trucks, which are mobile billboards, to maintain public awareness.

Profitability is currently down about as sharply as you would ever expect. Due to the severe recession we're in, landfill volumes are off in a huge way, YOY, yet WMI is still solidly profitable. It would require gross mismanagement of this business to turn it unprofitable. The upside, of course, is that when the economy improves, so will WMI's business. Meanwhile, you can bank those dividend checks with no fear of a cut.

In my portfolio, WMI is one of a handful of cash cows that relentlessly spit out dividends that I can re-invest. A rock-solid core holding.