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Covanta Continued to Post Losses in Fiscal 2014

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Net losses

As a result of the increased costs we saw in the previous part, Covanta Holding Corporation (CVA) continued to post losses in fiscal 2014. This was the company’s second straight year of net losses.

Covanta’s continuing operations, excluding the sold-off insurance business, swung to a loss, posting $2 million in net losses in fiscal 2014 compared to $43 million in net income in fiscal 2013. However, overall net losses were lower at $2 million, or $0.015 per share, in fiscal 2014 compared to $9 million, or $0.07 per share, in fiscal 2013, as the discounted insurance segment posted $52 million in losses in fiscal 2013.

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Dividend history

In spite of continued losses, Covanta increased its quarterly dividend payment to $0.25 per share in 3Q14, from $0.18 per share in 2Q14. The company boasts attractive dividend yield of 4.5%, higher than Waste Management (WM), Republic Services (RSG), and Waste Connection (WCN) at 3.2%, 2.8%, and 1.1%, respectively. With a low beta, or measure of systematic risk, the stock can be an attractive play for conservative investors. CVA is part of the iShares Russell 1000 Growth ETF (IWF).

Cash flows

Despite net losses, Covanta posted a healthy operating cash flow of $341 million in fiscal 2014, compared to $316 million in fiscal 2013. The operating cash flow was supported by favorable changes in working capital. The company spent $216 million on capital expenditures, resulting in free cash flow of $125 million in fiscal 2014. The company generated free cash flow of $128 million in fiscal 2013.

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