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Waste Management Hikes Dividend, to Buy Back More Shares

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Waste Management, Inc. (WM - Free Report) recently announced a 9.4% year-over-year hike in its quarterly dividend payout to 46.5 cents per share. This brings the annualized dividend payout to $1.86 per share. The first lot of the increased dividend is likely to be paid in March.

A steady dividend payment policy is part of Waste Management’s long-term strategy of providing attractive risk-adjusted returns to its stockholders. The company’s investment strategy takes a holistic view of the rapidly evolving market and deploys a dynamic capital allocation approach to execute its growth strategy. In addition, decent dividend increases at periodic intervals have been one of the company’s most attractive features.

The current hike marks the 15th consecutive year in quarterly dividend increase. Moreover, the recent dividend increase is the highest of its kind in about a decade and signifies the inherent strength of the company to generate significant free cash flow to reward the shareholders with healthy risk-adjusted returns. Waste Management also authorized a new share repurchase program worth $1.25 billion, effective immediately. The company intends to return $1.5 billion to shareholders in 2017 through dividend and share repurchases.

With diligent execution of operational plans, Waste Management has outperformed the industry with an average year-to-date return of 19.4% compared with 14.7% for the latter. The company has taken steps to divest non-core operations and enhance focus on potential high-growth areas that will generate higher cash flows and boost the top line. In addition, Waste Management’s successful cost-reduction initiatives have helped it accomplish remarkable gross margin expansion and EBITDA (earnings before interest, tax, depreciation and amortization) growth over the quarters.

Waste Management has also raised its guidance for 2017 with strong yield, volume, and cost performance in the third quarter. It expects adjusted earnings in the range of $3.19 to $3.21 per share compared with earlier expectations of $3.14 to $3.18. Free cash flow in 2017 is expected between $1.7 billion and $1.8 billion, up from previous expectations of $1.5 billion to $1.6 billion.

Waste Management currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader industry include S&P Global, Inc. (SPGI - Free Report) , TransUnion (TRU - Free Report) and Accenture plc (ACN - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

S&P Global has a solid long-term earnings growth expectation of 12.5%. It topped estimates in each of the trailing four quarters with an average positive earnings surprise of 11.1%.

TransUnion has a healthy long-term earnings growth expectation of 10%

Accenture has a solid long-term earnings growth expectation of 10.3%. It topped estimates in each of the trailing four quarters with an average positive earnings surprise of 2.6%.

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