Death is big business. In 2014 the US death care industry produced $20 billion in economic activity and that’s only expected to grow as the population grows older. 2014 alone saw 2.59 million people die in the United States, equal to about 822 deaths per 100,000 people. Multiply that by the cost of a funeral (which can range between $8,000 to $10,000) and suddenly you’re talking big business. In fact, funerals are among the most expensive purchases consumers will ever make—_luckily, you won’t be fretting the bill_. With those kinds of numbers, opportunities for investment abound with a few relatively large companies, most of which are publicly traded and control most of the businesses that sell caskets and granite for memorials. This article will look at the trend of the industry, some of the biggest companies in the space and the dividend potential.
World Birth and Death Rates
If anything, the death care industry will continue to grow as boomers begin to grow into old age. Looking at the mortality statistics, 55.3 million people die each year (that’s 151,600 per day) with an average life expectancy of 67 years. Looking at it in a different way, the population of the world is currently growing 1.14% per year, or 131.4 million births per year. After offsetting deaths, the population growth is about 80 million per year.
The Death Care Industry
Not a surprise with such big numbers, some of the biggest companies in the world service the death care industry, everything from offering funerals and cremations, to preparation and embalming services; further, there are memorials to be made, hospitals to run and supply, hospices and palliative care. In the United States alone there are over 22,000 funeral homes and 115,000 cemeteries; there is also enough embalming fluid buried every year to fill eight Olympic-size swimming pools; enough steel in caskets than was used to build the Golden Gate Bridge; and an amount of reinforced concrete that could build a highway from New York to Detroit—roughly 615 miles.
Those kinds of statistics mean there is big money to be had. And since people die every year, it’s considered a recession proof industry. Look at the following companies as a potential investor, each company is highly profitable and sit amongst some of the largest in the United States—plus, most offer a dividend: Service Corporation International (SCI ), Matthews International Corporation (MATW ), Hillenbrand, Inc. (HI ), Chemed Corp. (CHE ), Amedisys Inc and LHC Group, Inc.
Service Corporation International (SCI )
SCI provides death care products and services in the United States and Canada, including funerals and cremations. As of December 31, 2014, SCI operates 1,559 funeral service locations, 466 cemeteries, covering 45 states and 8 Canadian provinces pulling in $3 billion annually in revenue with a market cap of $6 billion. SCI has been paying a dividend since 2005, which has been steadily growing. Interesting fact, SCI holds about 12% of the funeral and cemetery market share in North America.
Matthews International Corporation (MATW )
MATW designs, manufactures, and markets memorialization products and solutions for the cemetery and funeral home industries in the United States, Central and South America, Canada, Europe, Australia, and Asia. Their specialty is “graphic imaging”—the process of engraving headstones and plaques. As of December 31, 2014, MATW had revenues of $1.32 billion. MATW has paid a dividend since 1994. Interesting fact, the largest percent of their revenue comes from bronze plaques, figuring in at approximately 27%.
Hillenbrand, Inc. (HI )
HCI is more of a diversified business with two segments, Process Equipment and Batesville. It is their Batesville brand that caters to the death care business, manufacturing, distributing, and selling funeral service products and solutions. As of December 31, 2014, HCI had revenues of $1.69 billion. HCI implemented a dividend in 2008 and has increased it every year since. Interesting fact, they sell 45% of caskets sold in the United States, nearly 800,000 out of the 1.8 million sold in the US.
Chemed Corp. (CHE )
Chemed provides hospice and palliative care in the United States. The company offers its services through a network of physicians, registered nurses, home health aides, social workers, clergy and volunteers. As of December 31, 2014 the company had $1.47 billion in revenue. Their dividend has been growing since 2006; it started at $0.06 per share per quarter and stands at $0.22 per share on a quarterly basis in 2015.
Amedisys provides a range of services from home care to providing comfort and support for those who are facing a terminal illness. As of December 31, 2014 the company owned and operated 316 Medicare-certified home healthcare centers and 80 Medicare-certified hospice care centers in 34 states in the United States. In 2014 AMED had $1.19 billion in revenue and a market cap of $1.50 billion. While this is a non-dividend paying stock, we simply couldn’t ignore it.
LHC Group Inc.
LHCG provides post-acute continuum of care primarily for Medicare beneficiaries in the United States. The company operates through three segments: Home-Based Services, Hospice Services and Facility-Based Services. As of December 31, 2014, the company had $745 million in revenue and a market cap of $754 million. In 2014 the company had been on an acquisition spree, acquiring 57 locations in 15 states. This is a non-dividend paying stock too, but one that certainly warrants space on your watchlist.
The Bottom Line
They say there are two guarantees in life: death and taxes. While the industry is a bit on the morbid side, with those odds it’s no wonder the death care industry is booming and is only expected to grow. You may as well find the right companies to invest in that are positioned to meet the demands of the market. Consistent growth and dividends—all good qualities for an investment. The companies listed above do just that and could be a good addition to any portfolio. Just be sure to do your own due diligence before making any investment decision. One thing is certain, the death care industry is not a dying industry… pun intended.
Image courtesy of Serge Bertasius Photography at FreeDigitalPhotos.net