This Resilient Dividend Stock Is Crushing the Market This Year. Time to Buy?

Key Points
Waste Management's revenue grew 7.1% to $6.31 billion in its most recently reported quarter.
The company's full-year adjusted operating EBITDA margin exceeded 30% for the first time last year.
The stock commands a premium valuation, leaving little margin of safety.
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It has been a turbulent start to 2026 for many investors. As of this writing, the S&P 500 is down about 5% year to date. But amid this broader market weakness, shares of Waste Management (NYSE: WM) have been a bright spot.
The environmental services giant's stock is up more than 5% so far this year. And it's easy to see why investors have flocked to the shares. The company provides an essential service, generates massive cash flow, and routinely rewards its shareholders with dividend increases -- a compelling value proposition during times of uncertainty.
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Is the stock's recent outperformance a sign it's time to buy? Or has the market already fully priced in the company's strong fundamental execution?
A resilient business model
Waste Management's latest quarterly update showed a business that is navigating the current macroeconomic environment with ease.
In Q4, the company's revenue reached $6.31 billion -- up 7.1% year over year. A significant portion of this top-line jump was driven by robust pricing power in its collection and disposal business, as well as a meaningful boost from its recent acquisition of Stericycle. Now operating as WM Healthcare Solutions, the newly integrated business contributed $615 million to the company's fourth-quarter revenue.
But what is perhaps more impressive than Waste Management's revenue growth is its expanding profitability. The company's adjusted operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expanded to 31.3% in Q4 -- up from 28.9% in the year-ago period. Further highlighting this operational efficiency, the adjusted operating EBITDA margin for its legacy business expanded 150 basis points to 31.5% for the full year.
In addition, Waste Management's total adjusted operating EBITDA surged 15.5% last year. Even more, the company's full-year adjusted operating EBITDA margin exceeded 30% for the first time in its history.
And this operational efficiency is translating directly into cash generation.
The company's free cash flow, or its cash flow from operations less capital expenditures, jumped nearly 27% last year to $2.94 billion. In addition, WM's bottom line remains robust, with Q4 earnings per share coming in at $1.83 -- up sharply from $1.48 in the year-ago period.
A dependable dividend
For income-focused investors, Waste Management's ability to consistently generate cash supports a very reliable dividend.
The company's board of directors recently indicated its intention to increase the annual dividend to $3.78 per share. At the stock's current price, that yields about 1.5%.
While a 1.5% yield might not seem significant at first glance, the payout is incredibly secure. Waste Management's payout ratio sits at about 50%, meaning the company is distributing only about half of its adjusted earnings to shareholders as dividends. This leaves plenty of wiggle room for management to continue increasing the payout in the coming years, even while funding its robust capital expenditures plans.
Where it gets challenging
So, the business is growing, margins are expanding, and the dividend is safe. Why not buy the stock today?
The primary hurdle is valuation. As of this writing, Waste Management trades at a price-to-earnings ratio of about 34.
For a mature, capital-intensive business in the waste and recycling sector, that is a steep premium. At this valuation, the stock arguably already prices in a successful integration of its recent acquisitions and continued margin expansion over time. These are, of course, possible outcomes. But I'd rather wait to see if I can buy the stock when best-case scenarios already seem largely priced in.
Put simply, the stock may be priced for perfection today.
Waste Management is undoubtedly an exceptional business with a durable competitive advantage. And for investors who already own the stock, the safe dividend and strong cash flow make it a great company to hold through market volatility. But for those looking to deploy fresh capital, I believe the lack of a margin of safety makes the stock more of a hold than a buy right now.
Should you buy stock in WM right now?
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool recommends WM. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.