3 Income Ideas For Contrarians

There’s a quiet shift happening in the market, and we’re going to tap into it for some big dividends, plus serious price upside, too. We are going to sideline tech stocks for now and buy top-quality stocks that have been left behind — meaning they haven’t yet bounced back to their pre-pandemic highs.

We also intend to grab stocks with high, and ideally growing, dividends — because a rising payout builds up the yield on our original buy; it also acts like a magnet on a stock’s share price. Let’s dive into three names that should be on your watch list now. All tick each box on our three-point checklist, and one even pays you a dividend every month.

Waste Management (WM)

Waste Management is a smart play on both the new President Biden stimulus plan and the massive cash hoard locked-down consumers are sitting on: in December, the average household saved 14% of disposable income, nearly double pre-pandemic levels.

Waste Management collects garbage and recyclables and operates landfills across the country, serving around 20 million customers. As consumers restart their spending, they’ll buy a lot of goods with a lot of packaging—and Waste Management turns that trash into cash. The stock also gets us in on more than just a consumer rebound: the firm’s operations are nicely spread across commercial and industrial customers, too.

Waste Management started 2021 with a strong base; despite the pandemic, it generated $2.7 billion of free cash flow (FCF, or the cash left after management pays the bills and funds expansion) in 2020, up from $2.1 billion in 2019.

That rising cash tide will, in turn, fuel Waste Management’s dividend, which grows no matter how much of a mess the broader economy is in: its workman-like payout rolled higher through the 2008/’09 mess and the 2020 meltdown.

wm

Yet despite these advantages, Waste Management still trades well below its pre-pandemic peak, even though management recently rolled out a nice 5.5% dividend hike. (That gap between the dividend and the share price is our upside, by the way, as rising dividends attract more investors who, in turn, push up share prices.)

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