Finance

Retail death care stocks lead the run-up

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On Friday the Dow Jones Industrial Average (DJIA) set a new record high by closing at 35,677.  On January 1, 2021, the DJIA stood at 30,606 so that high on Friday indicates a 16.6% increase year to date for 2021.  That’s pretty impressive. . . . and the NASDAQ closed Friday up 19.1% year to date and the S & P 500 index also closed on that date with a 20.9% increase year to date.

Pretty impressive. . . but not as impressive as Funeral Director Daily’s proprietary Death Care Index consisting of seven death care stocks which trade on public markets in the United States.  That index, the DCI, closed at $227.31 on Friday, up 24.4% from the $182.68 position of January 1, 2021.  That indicates that while America has certainly been bullish in 2021, investors have been extremely bullish about the death care industry.

The DCI dollar number is a representative of owning one share of each of the stocks of each of the seven companies.

The seven stocks that make up the DCI include retail funeral home and cemetery operators Service Corporation International (SCI), Carriage Services, Park Lawn Corporation, and StoneMor Inc.  The index also includes death care suppliers Hillenbrand Industries and Mathews International who, among other items, manufacture and distribute Batesville and Aurora caskets respectively.  Finally, the 7th company in the DCI is Security National Financial Corporation which operates in the funeral home, cemetery, preneed, and financial services realm of death care.

As a group of seven those companies with a one-share sum total of $227.31 also extended a cash dividend, in total, of $3.41.  That would represent a current yield of 1.5%.

While the 24.4% year to date growth is very good for the DCI as a whole, and more than any of the comparable indexes, the increase in value of the four companies who are in the retail death care businesses is even better.  Looking exclusively at the consumer funeral and cemetery services providers as a group — SCI, Carriage Services, Park Lawn Corporation, and StoneMor — you will see an increase in the group’s value of 32.0% year to date.  That number is even more impressive when you realize that it includes the fact that StoneMor’s stock has dropped about 8% in 2021.  The other consumer death care companies stock prices have individually risen the following this calendar year:  Carriage Services 41.2%,  SCI 29.6%, and Park Lawn Corporation 28.9%.

Funeral Director Daily take:  Everybody who sees these numbers will have a different take on why they are what they are.  Here are a couple of my takes:

  • Certainly, Covid-19 has led to increased deaths.  And, over the last 18 months funeral homes across North America, at least those in the public realm, have proven that they can come up with ways to be profitable even when looking at some families choosing less services because of social distancing factors.
  • Death care, in itself, has become increasingly in the news during the Covid-19 pandemic.  I think that the investing public has seen that it is a necessary part of life. . . that of paying for funeral or memorial services.  These same investors have now looked at the long-term trend of the aging of North America and see larger numbers (and potential profits) on the horizon.  This bodes well for long-term investors looking for long-term growth.
  • For short-term investors the death care service industry is not hobbled by the supply-chain issues that have been happening.  While supply-chain issues may happen in the casket side of the business, there is no supply-chain issue in the care of a dead human body.  In essence, funeral homes will serve families even if it means that not all caskets are available. . . . i.e the business will go on as compared to business who are short of product which may yet happen this winter with automobiles, electronics, petroleum, groceries, and white goods.  So, to many investors in relative terms, death care looks like a safer bet for the short-term.

An Investor Take:  I’m not a big fan of certificate of deposit investing, however, this morning I checked the newspaper for local rates and found the best I could get would be 0.5% for a 5-year period.  That’s not much of a rate. . . however, on the plus side, your principal is safe within FDIC limits.

Tom Anderson
Funeral Director Daily

When you look at the DCI it throws off a yield of three times that amount. . of 1.5%.  Still not real large.

If you were, however, a growth plus yield investor, and were inclined to believe in the growth of the four consumer oriented funeral and cemetery companies – SCI, Carriage Services, Park Lawn Corporation, and StoneMor — an investment at this time would throw off a yield of 1.21%.

Finally, if you were more of a fan of manufacturing and the supply side of death care, the two DCI companies in that realm, Hillenbrand Industries and Matthews International when combined in equal shares throw off a yield of 2.14% at this time.  Both of them have Memorial units that are a part of a larger company with, in my opinion, positive prospects for the future.

Just some thoughts.

Disclaimer — The author of this article owns stock positions in Service Corporation International, StoneMor Inc., Park Lawn Corporation, Hillenbrand Industries, and Security National Financial Corporation.  All opinions expressed are his own.

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