Tuesday, August 2, 2011

Rising Dividend Payments In The Trash Industry

The recent debate over the United States debt deal has led to a bad week for stocks. Many investors have seen their shares plunge as the market had its worst week in awhile. While the market drop may be bad news for old investors, it does prevent an opportunity for new investors. There are some good dividend yields in the market and I would like to take a look at one today. The company in question is Republic Services.

Republic Services Group (RSG) s the 2nd largest provider of waste management services in the United States. The garbage industry is incredibly competitive with firms consistently underbidding each other in order to win contracts. The company’s chief competition is Waste management who is the largest player in the industry. Republic Services has been a long time investing favorite of Microsoft founder Bill Gates.

The company recently reported solid quarterly earnings and chose to reward investors with a share increase. Earnings per share came in at 12 cent per share which was a drop. Revenue came in at $1.5 billion dollars. The company saw its cash position rise nearly fourfold with more than $305 million dollars in cash and cash equivalents. Commercial and industrial collections increased across the board.

The company has been doing a better job of improving its cash ratios and extinguishing its own debt. Investors are benefiting from this in the form of higher dividends. Republic Services increased its dividend payout 10% to 22 cents per share just this week.That is the third consecutive annual dividend increase. The company has now become a quality dividend stock with its yield of 3.06%. The yield over 3% placed Republic Services into investor friendly territory.

Since the current payout represents slightly more than half of the current year’s earnings, the payout appears to be sustainable. Shares are reasonably priced at 1.4 times book value and 1.3 times sales. The 15 P/E ratio is right in line with many industry competitors. This is a company that an investor can safely place on their dividend stocks watchlist.

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