Hugh Dive

In our opinion, the result of the week was from integrated funeral business operator Invocare. Despite a reduction in the population mortality rate, management were able to deliver 10% earnings per share growth and 12% growth in dividends by both controlling costs, success in selling higher margin funeral products and stronger earnings from the $470 million “float” of pre-paid funeral contracts.

As a portfolio manager, I see big increases in the dividend as a stronger signal for earnings growth than a bullish earnings statement. Whilst an earnings guidance is just words that can be downgraded easily, a company’s board tend not to make dividend decisions that might have to be reversed in the near future.

Invocare currently holds a market share of 33% in Australia and 30% in New Zealand, and as the mortality rate returns to trend, Invocare is well position to deliver on their target 10% EPS growth.


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