Every week an alert surfaces on my phone, reminding me to drag our garbage bin and park it at the corner of the street so that the garbage truck would come and take the garbage away. When I first moved to America, the system was a little different. I used to carry our garbage bag to a dumpster located 15-20 ft from our back door. The eventual outcome of that disposal was the same as the visual of a garbage truck picking up the entire dumpster and dumping its contents into its boot.
The U.S. Census Bureau recorded 120.76 million households with 2.62 Persons Per Household between 2015 and 2019 . According to the Environmental Protection Agency, “The total generation of municipal solid waste (MSW) in 2018 was 292.4 million tons or 4.9 pounds per person per day” . Waste is an amorphous topic that migrates disciplines from the biological to the industrial and starts with an orbicular process of the arrival of a wagon picking up and jettisoning a bin. Operating in this space is Waste Management Inc (NYSE: WM), mislabeled as a Standard and Poor’s 500 component when it should be a Standard and Poor’s 500 annuity.
Waste Management Inc (NYSE: WM) has a market capitalization of approximately $59.38 billion and, according to their 2021 Annual 10-K form, employed 48,250 people, owned or operated 268 landfills across the United Statesand Canada, and 348 transfer stations “that consolidate, compact and transport waste efficiently and economically” . In 2020, the company generated $15.22 billion in Operating Revenues, $1.50 billion in Consolidated Net Income, and Basic Earnings Per Share of $3.54. Since 2010 and 2015, the company has increased its operating revenues by 21.60% and 17.41%, respectively, with an average year-over-year increase of 2.06% for 2010-2020. The company reports operating revenues under the following segments: Commercial, Residential, Industrial, Landfill, Transfer, Recycling, and Intercompany.
The following graph illustrates the percent composition of the different revenue streams concerning total operating revenues between 2010 and 2020. A significant portion of their operating revenues is derived from their collections services, with Commercial being the most important contributor to operating revenues.
According to their Dividend History, between 2004 and 2016, total yearly dividends averaged a 6.94% year-over-year increase, with the quarterly dividend rising from $0.1875 on March 25, 2004, to $0.575 on March 26, 2021, representing a 206.67% increase. The company has a strong history of preserving and boosting its Retained Earnings, “the amount of net income left over for the business after it has paid out dividends to its shareholders” . Since 2010, retained earnings have increased 74.36% and averaged a year-over-year increase of 5.93%. The company reported $11.16 billion in retained earnings in 2020, compared to $6.40 billion in 2010.
Parsing through the visual is one trendline that demands attention- Landfills. The company operated 268 landfills across the United States and Canada and is the second biggest contributor to total operating revenues. Of those, 268, 263 are Solid Waste Landfills, “which is a discrete area of land or excavation that receives household waste” . According to their 10-Ks, the company collected 413,000 Tons Per Day across 263 sites in 2020 compared to 336,000 Tons Per Day across 266 locations in 2010, representing a Tons Per Day increase of 22.92%. The company registered a 2.15% year-over-year increase in Total Tons of Landfill and held an average of 102.35 million Total Tons of Landfill between 2010 and 2020.
According to the Environmental Protection Agency, Landfill Methane Outreach Program (LMOP) data released in March 2021, 164 landfills out of 1072 Operational and Candidate Landfills (LMOP defines a candidate landfill as one that is accepting waste or has been closed for five years or less) are credited to Waste Management Inc (NYSE: WM). The data also reveals the Landfill Closure Year timeline in which there is a landfill in Houston, Missouri called Prairie Bluff Sanitary Landfill, which has the closure year of 2541.
The Average Year Landfill Opened was approximately 1979, and the Average Year Landfill Closure was about 2070. Thirty-six states had landfills associated with Waste Management Inc (NYSE: WM), Missouri, Pennsylvania, and Texas averaging more than ten. With 15.30% of Total Operational and Candidate Landfills registered to Waste Management Inc (NYSE: WM), data from the LMOP suggest validation when the company states that they own and operate “the largest network of landfills in the U.S. and Canada” .
I started this essay with the argument that Waste Management Inc (NYSE: WM) is not an S&P 500 component but an S&P 500 annuity. Merriam Webster defines an annuity as “a sum of money payable yearly or at other regular intervals” . Yes, baked with the word annuity is connotations of life insurance and its promise of lifetime payments. Waste Management Inc (NYSE: WM) dividend history, means of revenue generation, and longevity of business operations should support an argument for its behavior as an S&P 500 annuity. The company is not shy about recognizing this feature as reflected by the reference to its revenues as “annuity like” in Investor Presentations of March 2013 and in their Investor Presentation of May 2020 reporting as much as 75% of revenue having “annuity-like characteristics.” Reflecting on a simple equation picked up in Science lessons from school should provide sharpness and clarity as to why their revenue stream is “annuity-like.”
The simple Law of Conservation of Mass, “the same amount of matter exists before and after the change—none is created or destroyed,” explains mass preservation during the transition between different states of matter: solid, liquid, and gas. We inhabit a material world with materials deeply intertwined with every nook and cranny of the microcosm. A natural derivative of this reliance on materials is waste. A company like Waste Management Inc (NYSE: WM) devotes its capitalistic inputs by receiving an undesired society output. In the future, even if society moves forward to developing eco-friendly materials that respond better to climate concerns, the law of conservation of mass suggests that a combination of two inputs will create necessary outputs and waste unless the combination of inputs delivers a pure output.
A society of consumers and companies focused on delivering productive and desirable goods, and services will create waste. According to the Environmental Protection Agency Advancing Sustainable Materials Management: Facts and Figures 2018, released in December 2020, the Materials Generated in Municipal Waste Stream in 1960 was 88.12 million tons, whereas, in 2018, it was 292.36 million tons. The waste generated tells a story of a society transitioning from canned to packaged and paper to electronic. Between 1960 and 2018, the Totals Metals and Paper & Paperboard Percent of Total Municipal Waste Stream declined from 12.3% and 34.0% to 8.8% and 23.1%. Food and Plastics increased from 13.8% and 0.4% in 1960 to 21.6% and 12.2% in 2018.
Waste is a consequence experienced in the timelines of every inhabitant on this planet. Participation in the social contract called the material society creates unintended waste that is easily overlooked due to a weekly visit from a garbage truck. A company like Waste Management Inc (NYSE: WM) represents a capitalistic endeavor when you present waste as a capital good and its cash flow and longevity as an annuity.