Waste Management Inc. (NYSE: WM) is not a high-flying growth stock, a game-changing technology or a robust dividend, but it has many qualities income investors can appreciate. 

Waste Management is a recession-proof essential service with a solid trajectory for organic growth, robust cash flow and capital return. It pays a reliable and growing distribution while repurchasing shares, investing in growth and sustainability, and maintaining a fortress balance sheet, which you can see in the share price. 

Waste Management's share price has trended steadily higher over the last decade and recently broke out of a significant consolidation. You can see the consolidation of the chart of monthly price action, which reveals an incredibly healthy market with the potential to rise another 20% to $210 in 2024/2025. 

Analysts' sentiment aligns with that target. MarketBeat.com tracks 14 analysts with current ratings on the stock; they've issued enough upgrades and price target revisions over the last 12 months to lift the rating to "moderate buy" from "hold" and the price target by 10%. 

The consensus aligns with the pre-release market action, suggesting the stock is fairly valued at current levels, but the trend is upward, and the recent revisions are above consensus. The highest target is the most recently set, issued in January before the Q4 release, and puts the market at $215. Upward revisions should continue now that the results and 2024 guidance are in. 

Waste Management manages another solid quarter

Waste Management had another solid quarter with top-line growth and accelerated growth on the bottom line. The company reported $5.22 billion in net revenue for a gain of 5.7% that outpaced the consensus by a slim 40-basis-point margin. Strength is due to a 7.3% increase in core pricing compounded by a 1.9% increase in adjusted disposal volume. 

The company widened its operating margin by 240 basis points adjusted to achieve a record 29.9%. SG&A costs were also controlled and aided a 34% increase in adjusted earnings. The $1.74 is also 21 cents or 1,370 bps above consensus, with strength present in the guidance. 

The company expects to sustain revenue and margin expansion in 2024. Revenue should grow by 6% to 7%, compounding earnings by another 30 basis points of margin expansion. Adjusted EBITDA is forecasted to grow by 8%, which the company says is sufficient to sustain the capital allocation plans. Those include investment in sustainability and modernization, dividends, share repurchases and strategic acquisitions. 

Waste Management builds shareholder value with capital returns

Waste Management is building shareholder value with dividends, distribution growth and share repurchases. The dividend is worth about 1.5% with shares near $197 and is about 40% of earnings. 

Repurchases shaved 1.95% off the share count in 2023, and both are forecasted to accelerate in 2024. The board announced its intent to raise the dividend by 20 cents or 7% and to repurchase $1 billion in shares or about 1.3% of the market cap. 

Waste Management shares jumped 5% following the release and guidance, setting a new all-time high. The move confirms the trend and points to additional upside this year. However, some resistance at the new highs suggests profit-taking is in play. In this scenario, the market for Waste Management may enter consolidation or even pull back to firmer support levels before extending the trend. 

The biggest risk for investors is the valuation. The stock trades at a high 28x earnings, but some justification exists, and its peers are even more highly valued. The company has a solid track record of growth, stable cash flow and capital returns to drive value, and a widening margin. Peers such as Rollins Inc. (NYSE: ROL), Waste Connections Inc. (NYSE: WCN) and Republic Services Inc. (NYSE: RSG) trade from 31x to 47x while paying lesser yield, suggesting a deep value in Waste Management and potential for a price/multiple expansion.