The death care industry has usually been seen as stable. People couldn’t avoid dying, and once they died they were buried, at what has been, over the years, a steeply increasing cost.
However, as with many other industries, things sometimes change over time. A keen eye must be aware of those changes, which can transform an industry that was once stable and reliable, into something of a dying asset.
Such a change might be under way in the death care industry. The decline in religious practice, together with surging costs and a rather permanent crisis for a good part of the population, is steadily driving up cremation rates.
Not only are cremation rates increasing fast, but they are also, in many places, becoming quite high, with it being probable that even where such hasn’t happened yet, it will happen in time.
Since cremations are a lot less expensive than a full funeral (NFDA estimates the cost of a cremation at $500, less than 1/10th the cost of a funeral), this trend has huge negative implications for the traditional death care / cemetery / funeral home operators. There are some quoted stocks in this industry, four of which I list below:
Service Corp. International (NYSE:SCI)
Service Corp. International has a market capitalization of $2.2 billion, and is trading at a TTM P/E of 16.84 with expected earnings growth of 14.75% taking it to a forward P/E of 13.71 next year. The TTM P/E means SCI trades at a premium to the S&P500 (NYSEARCA:SPY) TTM P/E of 13.0. The PEG (Price/Earnings Growth) stands at 1.68. The Price/Book is 1.56.
SCI's dividend yield is 2.08%, for a dividend payout of 32.68%. The dividend is higher than the yield on the 10-year bond, presently at 1.90%.
The ROE is 9.53%.
The stock has been punished lately, being down -5.51% in just the last week. However, year-to-date the stock is still up by 18.52%.
Stonemor Partners LP (NYSE:STON)
Stonemor Partners LP has a market capitalization of $496.65 million. The Price/Book is 2.55.
STON's dividend yield is generous at 9.13%, and seems unsustainably high. The dividend exceeds the S&P500 dividend yield, presently at 2.1%. The dividend also beats the yield on the 10-year bond.
The stock is down 1.50% in the last month as well as being down -7.50% year-to-date.
Stewart Enterprises Inc. (NASDAQ:STEI)
Stewart Enterprises Inc. has a market capitalization of $481.58 million, and is trading at a TTM P/E of 12.79 with expected earnings growth of 9.76% taking it to a forward P/E of 11.93 next year. STEI also trades at a discount to S&P500 TTM P/E. The PEG stands at 1.28. STEI has a low Price/Book of 1.12. There are studies that indicate that low Price/Book stocks outperform over time, although some times the low Price/Book is also an indication of risk or permanently bad profitability.
STEI's generous dividend yield is 2.61%, for a dividend payout of 29.86%. The dividend also exceeds the S&P500 dividend yield and beats the yield on the 10-year bond.
The ROE is 8.93%.
The stock has been punished lately, being down -9.29% in just the last week and is also down -18.64% year-to-date.
Carriage Services Inc. (NYSE:CSV)
Carriage Services Inc. has a market capitalization of $103.87 million, and is trading at a TTM P/E of 12.24 with expected earnings growth of 25.00% taking it to a forward P/E of 8.66 next year. CSV also trades at a discount to S&P500 TTM P/E. CSV has a low Price/Book of 0.82.
CSV's dividend yield is 1.78%, for a dividend payout of 10.83%. The ROE is 6.99%.
CSV is up by 17.54% year-to-date.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.