What Every Waste Management Investor Should Know Before Buying

Legendary investor Peter Lynch liked companies that were not only boring, but a little bit disgusting. His theory was that if investors didn't want to know more about the business, they'd be less interested in bidding up the price of a stock.

Well, trash hauler and landfill operator Waste Management (NYSE: WM) is just about as disgusting as it gets, but it's a great example of a company that's paid off for Peter Lynch fans, with a share price that's increased more than 375% over the last 10 years on a total return basis.

Here's what investors need to know -- without the icky bits -- before buying in.

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Trash is big business

Trash doesn't go away, and as the North American population grows, we just keep making more of it. That's been good news for North American trash haulers and landfill operators.

Although there are plenty of small local and regional companies in North America that offer municipal and corporate trash pickup, recycling pickup, and landfill services, there are three massive companies that control the lion's share of the industry. Waste Management, with an $86.9 billion market cap, is the biggest, followed by Republic Services (NYSE: RSG) at $67.3 billion and Waste Connections (NYSE: WCN) at $44.7 billion.

Business tends to be pretty steady for these companies, with low customer churn. That's thanks to the big barriers to entry, including a limited supply of existing landfills and the difficulty in adding new landfills, which negatively impact nearby property values. Meanwhile, in order to bid on a municipal trash collection contract, you not only need landfill space, but a fleet of specialty trucks. Small wonder that Waste Management's customer churn is below 10%.

The dividend is solid

Waste Management has a 22-year history of annual dividend increases, many of which have been quite significant. In 2025, for example, the company upped its dividend by 10%. Its reliable stream of cash from its long-term contracts helps to keep that dividend secure.

Speaking of cash, management expects free cash flow for 2025 to be between $2.8 billion and $2.9 billion, which gives plenty of dividend coverage, since the company's current dividend payouts for 2025 are expected to total between $1.3 billion and $1.4 billion.

Although Waste Management's dividend yield is currently only 1.5%, which is a near-historic low for the company, the payout itself has increased more than 114% over the last 10 years. But the share price -- without including dividends -- has increased by 305%, meaning that even though the yield has shrunk, investors have still seen massive rewards.

John Bromels has positions in WM. The Motley Fool recommends WM. The Motley Fool has a disclosure policy.