For those of you who follow the public companies in the death care industry we at Funeral Director Daily have initiated coverage of what we call the Death Care Index (DCI) for the last couple of years to help you get a context of how our industry is comparing to the market as a whole. Our DCI consists of eight stocks who have at least a portion of their business in the death care industry.
We follow companies that manufacture and sell products such as caskets, crematories, and cemetery markers. We follow companies who compete in the preneed insurance markets and we follow companies who operate retail funeral homes and cemetery properties. The companies are Service Corporation International, Carriage Services, Matthews International, Park Lawn Corporation, Security National Financial Corporation, Stonemor Partners, Assurant, and Hillenbrand Industries.
We last checked in on these companies on October 22, 2018 (about 5 months ago) and prior to that on April 20, 2018 (about 11 months ago). The DCI represents owning one share of stock in each of the eight companies that we mentioned. The total of those shares of stock – the Death Care Index – sits at a value of $265.87 as of the close of business last Friday. That compares to a value of $289.04 on October 22 and a value of $292.24 on April 20, 2018. So, in essence, the value of the DCI has slipped $26.37 in the last eleven months. . . a drop of right at 9%.
In contrast, the Dow Jones Industrial Average – a comparative measure – is valued at 25,848 as of Friday which is an increase of 1,386 points from the level (24,462) it was sitting at last April 20.. . . That is an increase of 5.4% as compared to the -9% drop of the DCI.
Finally, if you owned one share of each death care stock, the DCI, you would find that it pays a total dividend of $5.40 on its $265.87 value. That is a dividend yield of 2.03%.
Funeral Director Daily take: So, what should you take from this information? When you look at the individual companies that make up the DCI I would argue that this drop in value is not unexpected.
Casket manufacturers are seeing less of a demand for their products in a cremation world. Funeral home operators have acknowledged that the business model that has worked for decades in the predominant earth burial market has changed in the predominant cremation world and those companies are coming to grips on how their models need to work and the change involved in creating larger profits.
One of the things that I have mentioned before is the possibility that public funeral home and cemetery operators boost their dividends to increase stock price. Historically, they have used free cash-flow for acquisitions but as they seem to get more selective on the type and size of acquisition target that they prefer, will they reward their stockholders with more dividends?
We now look at the acquisition companies such as SCI, Carriage Services, and Park Lawn Corporation throwing off dividend yields of 1.8%, 1.5%, and 1.8% respectively. All are in the same general area. It will be interesting to see what happens from these three.