Wunderlich Securities Gives Color On Covanta Holding Corporation's Dividend, Share Repurchasing

Wunderlich Securities reiterates its Buy rating and $21 target on Covanta Holding Corporation CVA. The company's 4Q10 results and 2011 outlook bring credibility to CVA's robust FCF and new capital allocation philosophy. The announcement of a regular $0.075 quarterly dividend combined with a $50mm increase in CVA's repurchase authorization provides further evidence that management is comfortable with its FCF generation and committed to returning FCF to shareholders.

CVA now has $105mm remaining on its authorization and will return $45mm annually to shareholders via the dividend. CVA's response to shareholder capital allocation feedback combined with incremental financial transparency should help move its share price higher. After using $95mm to repurchase shares in FY10, CVA has $105mm remaining for repurchases in FY11. All in, CVA has the ability to return $150mm to shareholders in FY11 based on the current authorizations.

CVA closed Monday at $16.54