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Cleanaway Waste share price climbs after earnings, dividend up

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The Cleanaway Waste Management Ltd (ASX: CWY) share price has soared in early trade today after the company released its FY2020 earnings results. The Cleanaway share price is up more than 8% at the time of writing to $2.42 a share after closing at $2.24 yesterday.

What does Cleanaway do?

Cleanaway is the largest waste management company on the ASX, with a market capitalisation of $4.6 billion. The company is active in the residential, commercial and industrial waste industries, with an especially large presence in the collection of residential waste. Cleanaway has contracts with more than 95 municipal councils for waste collection. It also boasts the largest hydrocarbon (oil) recycling program in the country.

What did Cleanaway report this morning?

The company reported that revenue increased to $2.33 billion, up 2.1% from FY2019.

Earnings before interest, tax, depreciation and amortisation (EBITDA) also rose by 2.5% to $473 million over FY19’s earnings. That translates into an 8.7% increase to 7.5 cents in earnings per share (EPS).

That helped boost underlying net profit after tax by 8.7% to $152.9 million, although statutory net profit slipped 6.6% from FY19’s result to $112.6 million. This was largely due to underlying costs from the recent acquisitions of Toxfree and SKM.

The company also reported that its free cash flow was up 11.5% for FY20 to $230.1 million.

Dividend reward

Dividend investors will be pleased by Cleanaway’s results this morning. The company has announced a 10.5% increase in its final dividend to 2.1 cents per share. That pulls its total dividend payments up to a fully franked 4.1 cents per share for the financial year, up 15.5% on FY19’s payout of 2.55 cents per share. The final dividend will be paid on 14 September, with the option of participating in the company’s dividend reinvestment plan at no discount.

This dividend gives Cleanaway a trailing yield of 1.83% on yesterday’s closing share price.

Cleanaway’s segments were a mixed bag. Revenue from Solid Waste was up 0.8% to $1.37 billion, while revenue from Industrial & Waste was down 8.3% to $313.4 million. Liquid Waste & Health reported a 3.8% increase to $513.6 million.

Cleanaway share price outlook for FY21

Looking to FY21, the company told investors that “trading conditions remain too variable to provide guidance currently”. A trading update will be provided at the company’s annual general meeting on 14 October instead.

However, the company’s CEO Vik Bansal has this to say on the FY20 results:

Our financial results highlight the defensive characteristics of our revenue streams. Each of our operating segments – Solid Waste Services, Industrial & Waste Services and Liquid Waste & Health Services – performed well during the year despite the effect of COVID-19, which highlights the diversification benefit of our operating segments and strength of our business.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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