The world’s garbage glut is a worsening headache for government officials, but it’s a big opportunity for investors to achieve healthy capital growth. Buying top-quality waste industry stocks can help you unleash the secrets of a new alchemy: the conversion of trash into cash.

Waste Management (NYSE: WM) is the best-of-breed stock in the waste management industry. With a market cap of $67.1 billion, this Texas-based giant is the world’s largest solid waste collection and disposal company. Waste Management also treats and disposes of hazardous and medical waste, and it operates waste-to-energy and landfill gas-to-energy facilities. The company operates in 48 states, the District of Columbia, Canada, and Puerto Rico.

Some industries rise and fall with the trends, but garbage disposal is a hardy perennial. According to Allied Market Research, the global waste management market was worth $2 trillion in 2019 and this number is expected to reach $2.3 trillion by 2027.

American households, stores, restaurants and other businesses generate about 293 million tons of municipal solid waste (MSW) every year, according to the most recent statistics available from the U.S. Environmental Protection Agency (EPA). That’s 4.9 pounds per person per day. MSW encompasses trash from companies, buildings, houses, and yards.

Every year since 1960, Americans have generated more solid waste than the year before. The amount of trash the country produces has tripled since 1960, while the U.S. population has increased about 90%.

Nationwide, the number of active landfills has shrunk from nearly 8,000 in 1988 to 1,908 in 2010, to only about 1,250 today. The U.S. disposes enough trash every day to fill 50,000 garbage trucks with 18,000 pounds of trash in each.

The search for new methods of disposal is becoming more frantic among federal, state and municipal leaders in the U.S. There’s enormous variation in waste capacity among the states. For example, Arkansas reports sufficient capacity to operate more than 600 years without launching another facility, while New York State only has 25 years of capacity left.

The problem perplexes global leaders as well.

In particular, developing countries such as China and India face massive waste handling problems, as their middle classes rapidly expand.

According to a database compiled by the World Bank, the world generates nearly two billion tons of MSW each year, enough to fill 822,000 Olympic-sized swimming pools.

China produced the most MSW of any country at 395 million tons per year, followed by the U.S. with 265 million tons. The U.S. ranked considerably higher for the creation of MSW per capita at about 812 kg for every U.S. resident (see chart).

Between 2016 and 2050, waste on a global basis is expected to post a growth rate of about 70%, according to the World Bank.

WM is the dominant publicly traded firm in the handling, treatment and disposal of solid waste. The stock enjoys strong fundamentals and excellent prospects for outsized price appreciation.

At the Top of the (Garbage) Heap

Founded in 1968, Waste Management is the largest collector of recyclable materials from businesses and households in North America. Waste Management provides collection services, including picking up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery facility (MRF), or disposal site. The company also owns and operates landfill gas-to-energy facilities in the U.S., as well as transfer stations.

The company runs 254 solid waste landfills; five secure hazardous waste landfills; 97 MRFs; and 337 transfer stations. With nearly 26,000 collection and transfer vehicles, Waste Management operates the largest trucking fleet in the industry.

Waste Management’s services generate a robust cash flow that it largely devotes to acquisitions, dividends and share buybacks. The company has consistently paid dividends since 1998.

Growing revenue from acquired entities and increasing operational efficiencies should continue fueling the company’s revenue and earnings growth well into the foreseeable future.

Meanwhile, new regulations from global organizations designed to boost environmentally friendly technologies are a boon for transnational players such as Waste Management. Notably, the World Trade Organization has significantly reduced tariffs on activities and products related to recycling, waste management and wastewater treatment.

President Biden’s $1 trillion infrastructure bill, signed into law in 2021, contains provisions that are manna for “green” technologies such as the management of municipal waste.

The average analyst consensus calls for Waste Management to rack up year-over-year earnings growth of 17.7% in the fourth quarter and 8.10% for full-year 2023. The stock currently trades above its 100- and 200-day moving averages, which signals an upward swing with momentum.

I think those earnings growth projections for WM are conservative. The concerted global push for green technologies this year and beyond should prove a bonanza for Waste Management. As icing on the cake, this growth stock offers a dividend yield of 1.63%.

It’s hard to go wrong with Waste Management as a long-term investment, because humans will continue to produce mountains of municipal solid waste, year after year.

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John Persinos is the editorial director of Investing Daily.

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