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Strategies & Market Trends : Dividend investing for retirement
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To: Kapusta Kid who wrote (5398)8/12/2010 2:05:28 PM
From: E_K_S  Read Replies (2) of 34328
 
Hi Pete -

I looked at the different garbage companies and wondered if there is any metric that takes into account the useful life of the dump sites owned (before they must be closed due to capacity). The biggest expense for these companies long term is the siting, development and permitting of their dump sites.

It is very expensive to build new sites with all the new environmental regulations. Maybe it is also a function of the geographical region these companies operate in too. CA has very strict environmental regulations. Perhaps this is reflective in the 5yr operating margins you posted.

I do know that in CA, the cities license the "garbage" franchise to an exclusive vendor (usually a five year contract term). Therefore, some of the typical metrics do not fit when evaluating these companies. It's more in line with that of a cable company.

Thanks for your table as the 5yr & 10yr numbers bring a bit better perspective on each company's performance. The useful life of a dump site in a large metropolitan city (like Silicon Valley where I live) is 45 to 50 years. It cost over 25x more here to build an equivalent site that will close in the next five years. The expected life is less too.

I do agree with you that these companies are not selling at value prices BUT have you seen your garbage bill fall recently? My garbage bill has never gone down, only the size of my container.

I expect this industry to have pricing power in the future where other sectors may not. This should allow these companies to raise their fees and I expect them to raise their annual dividends too.

EKS
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