Cleanaway Waste Management Limited (ASX:CWY) has a dividend reinvestment plan (DRP), but shareholders cannot use it for the latest dividend. The company's ASX dividend notice for the fully franked FY26 final dividend of 3.5 cents per share states the DRP does not apply, so the payment will be made in cash.

Latest developments

The key development is a Takeover approach. Cleanaway said it had received a conditional, non-binding indicative proposal from EQT Infrastructure to acquire all of its shares by scheme of arrangement at $3.13 cash per share, less the cash amount of any dividends declared after the proposal date. The company said this implied an Enterprise value of about $9.4 billion. The board granted exclusive Due Diligence and said it intends to recommend a scheme at no less than $3.13, subject to a binding implementation deed, no superior proposal and an independent expert concluding the scheme is in the best interests of shareholders.

As the final dividend was declared after the proposal date, the proposed cash price would be reduced by the amount of that dividend under the proposal terms. In a subsequent update, Cleanaway said EQT had confirmed nothing had arisen in due diligence that was likely to cause it not to proceed on the proposal terms, with confirmatory due diligence continuing. The company stressed there is no certainty a binding deal will be reached.

FY26 results showed gross Revenue up 13.5% to $4,371.3 million and underlying EBIT up 14.2% to $470.2 million. Underlying net profit after tax rose 13.6% to $223.1 million, while statutory NPAT fell 37.2% to $98.5 million after significant items. Free Cash Flow rose 63.7% to $213.8 million.

Key numbers

Cleanaway's FY26 dividends comprise the 3.35 cent interim and the 3.5 cent final, totalling 6.85 cents per share. Both dividends are fully franked.

The final dividend has passed its ex-dividend and record dates, with payment to follow. The value of franking credits depends on each shareholder's individual tax position.

About the company

Cleanaway describes itself as a total waste solutions provider, operating across more than 350 locations in Australia, New Zealand and the Middle East. It runs Australia's largest waste and industrial services fleet, supported by recycling facilities, transfer stations, engineered landfills, liquid treatment plants and refineries. Mark Schubert is Chief Executive Officer and Managing Director.

The FY26 result was driven by Solid Waste Services and the Contract Resources business, while Health Services and Industrial Services were weaker.

How the DRP works

Cleanaway's investor website states that it operates a DRP, administered through Computershare. When the plan is operating, eligible holders can receive new shares instead of cash. For the FY26 interim dividend, the DRP price was calculated as the average of the daily volume-weighted average prices of Cleanaway shares traded on the ASX over a five-business-day pricing period, with no discount applied, and the shares were a new issue. Cleanaway confirmed the DRP price in an updated dividend notice.

For the 3.5 cent final dividend, however, the dividend notice lodged with the FY26 results indicates the DRP does not apply. The company did not give a reason in the notice. Future dividend notices set out whether the plan applies to a given dividend.

Why it matters for income investors

The change means the final dividend is paid as cash, and shareholders who wish to reinvest would need to acquire shares on market themselves, which usually involves brokerage. It also means no new shares are being issued through the plan for this dividend, so there is no DRP-related dilution on this payment.

When a DRP is operating, participating holders receive additional shares that are themselves eligible for later dividends, without brokerage. Shares are allocated at the market-based DRP price determined under the plan rules.

The dividend itself grew. FY26 payments of 6.85 cents were up 14.2% on FY25 and represent a Payout Ratio of 68.8% of underlying NPAT. With a takeover proposal under negotiation, the outcome of the EQT process is a significant Factor for shareholders alongside dividend income.

What comes next

The key milestone is whether Cleanaway and EQT sign a binding scheme implementation deed. Cleanaway said the parties are working towards that, while EQT continues confirmatory due diligence. Any scheme would also need Shareholder and court approvals, and the proposal is conditional on regulatory clearances, including from the Foreign Investment Review Board and the ACCC.

The company has flagged that a fully franked Special Dividend may be considered as part of the proposal. On a standalone basis, Cleanaway expects FY27 underlying EBIT of $500 million to $530 million, which remains subject to operating conditions.

Risks and context

The largest near-term uncertainty is deal risk: the EQT proposal is non-binding, and there is no certainty it will result in a binding transaction. Statutory profit was also well below Underlying Profit in FY26 because of significant items.

Company-specific risks include underperformance in Health Services and Industrial Services, and costs tied to IT transformation. If the DRP operates for future dividends, reinvested dividends are still assessable income, and each DRP parcel sets a new cost base for Capital Gains Tax purposes.

Conclusion

Cleanaway Waste Management (ASX:CWY) has a DRP, but it is not operating for the 3.5 cent fully franked FY26 final dividend, which is being paid in cash. With a non-binding EQT Infrastructure proposal under negotiation, the takeover process is likely to be a larger focus for shareholders than dividend reinvestment.

Key Insights

Cleanaway Waste Management (ASX:CWY) delivered higher underlying Earnings and free cash flow in FY26, lifting total fully franked dividends to 6.85 cents per share. Its DRP, which operated for the Interim Dividend with new shares issued at no discount, does not apply to the final dividend, so that payment is made in cash.

The non-binding EQT Infrastructure proposal remains subject to a binding implementation deed, approvals and other conditions, and the proposed price is reduced by dividends declared after the proposal date. FY27 guidance and any special dividend remain conditional.