Monday, September 19, 2011

DIVIDEND MACHINE September 19, 2011 TRASH - RSG or WM

Trash Recycling with Disposal ContainersImage by via Flickr
                My search for a dividend machine for this week was very interesting.    Several companies came so close to meeting our four hurdles (1) makes money (2) pays at least a 3% dividend with a payout that is less than their earnings (3) has increased the dividend every year for at least 5 years and (4) has a low debt to equity ratio.  I am still waiting for Verizon to be my pick but it is just not quite ready as they pay down debt and work on creating ever-increasing income…after all, ever-increasing income is a precursor to ever-increasing dividends.

                I am going with trash this week.  RSG, Republic Services peaked my interest with earnings of $1.26 and a dividend of $.88.  At the close on Friday September 16, 2011, of $28.85, the yield is just barely above 3 percent.  Analysis of RSG lead me to review Waste Management symbol WM.

              Waste Management, symbol WM, earns a solid $1.98 per share and pays out $1.36 in dividends.  At Friday’s closing price of $32.01, WM sports a dividend yield of 4.25 percent, which exceeds Republic’s dividend yield by over 1.25 percent.   When looking at dividend growth Republic is the winner, but WM has also increased the dividend every year and has provided a few extra payouts.   In 2006, RSG paid $.107 per share per quarter and will pay $.20 per share this quarter.  In 2006, WM paid $.22 per share per quarter and will pay $.34 per share per quarter.   

                Since both RSG WM meets three of our four criterion, the final measure is debt to equity ratio.  WM has a D/E ratio of 1.44 and RSG has a D/E of .95.  

               The choice is yours.  WM pays out more today than RSG but RSG is more fiscally solid than WM.  RSG pays out less but has increased the payout at a faster rate than WM.   It is nice to have two choices this week.

Very Truly Yours,
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