Dividend Investing Ideas Center
Have you ever wished for the safety of bonds, but the return potential...
[Updated by Sam Bourgi on April 11, 2018] Death is big business. The U.S. death care industry alone is said to produce well over $20 billion in economic activity annually. This figure is expected to rise substantially as more Americans enter old age.
In the United States, the total death rate per 1,000 is 8.44, with the number of deaths topping 2.7 million annually. 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 industry trends, some of the biggest companies in the space and the dividend potential.
If anything, the death care industry will continue to grow as Boomers begin to grow into old age. Looking at the mortality statistics, 56 million people die each year (that’s 151,600 per day) with an average life expectancy of roughly 71 years. Looking at it in a different way, the net annual addition (i.e., excluding deaths) to the world population stands at just over 80 million.
It’s not a surprise that, with such big numbers, some of the biggest companies in the world service the death care industry, which includes everything from offering funerals and cremations, to preparation and embalming services. Further, there are memorials to be made, hospitals to run and supply, and hospices and palliative care to provide the final days of care.
In the United States alone, there are more than 21,000 funeral homes and 115,000 cemeteries. There is also enough embalming fluid buried every year to fill eight Olympic-size swimming pools; more steel in caskets than was used to build the Golden Gate Bridge; and enough reinforced concrete to build a highway from New York to Detroit (roughly 615 miles).
SCI provides death care products and services in the United States and Canada, including funerals and cremations. The company enjoys a strong presence across the vast majority of U.S. states as well as most Canadian provinces. Its share of the North American funeral and cemetery market has remained steady thanks to consistent revenue growth since the financial crisis.
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.
The segment of the death care industry – i.e., memorialization – accounts for roughly 40% of the company’s business, putting MATW on solid footing for future growth. This is adequately reflected in the company’s revenue growth since 2013. Over that period, MATW has managed to grow its sales by more than 50%. It therefore comes as no surprise that the company has paid a steady dividend since 2012.
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.
Generating roughly $1.6 billion in annual revenues in 2017, HCI has been increasing its dividend payout ever since resuming it in 2008. The company’s strong financial standing is backed by rebounding revenue growth since 2015, which has been aided by a diversified business model that includes process equipment as well as funeral services.
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.
The company generates roughly $1.7 billion in annual revenue, following years of consistent growth. A strong top line has helped Chemed grow its dividend every year since 2009, making it a top choice for income investors.
Amedisys provides a range of services from home care to providing comfort and support for those who are facing a terminal illness. The company maintains a large and steady presence across multiple segments of the death care industry, including Medicare-certified home healthcare centers and Medicare-certified hospices. The company is active across the majority of U.S. states as well the District of Columbia.
From the perspective of financials, AMED generates roughly $1.5 billion in annual revenue. While this is a non-dividend paying stock, we simply couldn’t ignore it.
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.
The company has expanded its revenues significantly over the past decade, from $383 million in 2008 to nearly $1.1 billion in 2017. This growth was aided by a large expansion campaign across dozens of states. This is a non-dividend paying stock too, but one that certainly warrants space on your watchlist.
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