Investing in dividend stocks can be a rewarding strategy, particularly in volatile market conditions. One such stock to consider is WM (NYSE: WM), which has exhibited a consistent track record of dividend growth, making it an appealing option for risk-averse investors.
Current Performance Overview
Despite underperforming the S&P 500 index in 2025, WM has shown resilience in its core collection and disposal business. However, it faced challenges in its recycling and healthcare segments during the third quarter. The company’s adjusted diluted earnings per share came in at $1.98, slightly below analyst expectations of $2.01, marking only 1% growth compared to the same quarter in 2024.
Challenges in Recycling and Healthcare
WM operates an integrated waste collection and disposal service catering to residential, commercial, and industrial customers. Nonetheless, its healthcare solutions and recycling processing segments have struggled. For instance, revenue from healthcare solutions did not meet projections, as WM deferred some planned price increases to enhance customer lifetime value. Additionally, the recycling processing segment experienced a $60 million revenue decline due to lower commodity prices. Specifically, the average price for single-stream recycled commodities plummeted by 35% from the previous year.
Future Revenue Forecasts
Looking ahead, WM is guiding for total company revenue of approximately $25.2 billion for 2025, which is at the lower end of its previous guidance range. This projection reflects the pressures from falling recycled commodity prices and subdued expectations from healthcare solutions.
Free Cash Flow: A Bright Spot
Despite recent setbacks, WM remains a cash flow powerhouse. The company anticipates generating free cash flow (FCF) of between $2.8 billion and $2.9 billion in 2025, with expectations of reaching $3.8 billion in 2026. To put this into context, WM paid over $1 billion in dividends within the first nine months of 2025, indicating that it generates significantly more FCF than needed to sustain its current dividend payments.
Dividend Growth Potential
WM has a strong history of dividend increases, with a 10% hike in its dividend last December, marking the 22nd consecutive year of growth. Given the robust FCF projections, investors can expect similar dividend increases in the near future. The current dividend stands at $3.30 per share, yielding around 1.5%, offering a reliable source of passive income for shareholders.
Investment Considerations
Investing in WM provides an opportunity to gain exposure to a company that delivers essential services across economic cycles. The stock’s valuation has become more appealing, trading at approximately 27.4 times projected earnings for 2025. Historically, WM commanded a premium valuation, with a 10-year median price-to-earnings ratio of about 29.4, indicating investor confidence in its business model.
In conclusion, WM is an excellent option for investors seeking a reliable dividend stock that offers stability and consistent growth potential. With a focus on generating passive income and a solid business model, WM can enhance a diversified investment portfolio. For more insights on stock market trends, you can visit Stock Market News. Additionally, for effective stock portfolio management and retirement investment strategies, check out Stock Portfolio Management services, where we aim for 20% growth per year.
