High Yield in America’s Only Certain Growth Industry

Death and taxes have been the scourge of mankind since time immemorial and were the inspiration for one of Benjamin Franklin’s more popular quips: “In this world nothing can be said to be certain, except death and taxes.”

Practically speaking, Ben’s right. But one can argue taxes are uncertain: It’s possible to avoid taxes if one were interested in a survivalist existence. Of course, very few of us are. Still, the possibility exists.

That leaves death. No one has figured out how to stick around in perpetuity. We all eventually leave. It’s part of the deal.

Demographic trends point to more of us leaving. We are, after all, a growing society. The latest census data show the U.S. population has pushed to 314 million people, which means we’ve grown by 20 million over the past 10 years. Moreover, we’re expected to push another 126 million by 2050, which means there will be 440 million of us four decades hence.

But we are more than a growing society; we are also an aging society. By 2050, the number of Americans aged 65 and older is projected to reach 88.5 million, more than double the 40.2 million in 2010. Thanks to baby boomers hitting their golden years en masse, by 2030 nearly one in five will be aged 65 and older, up from 16.5% today. (One High Yield Wealth investment is already exploiting the aging trend with both high yield and 100% total return).

Not surprisingly, the death trend will continue to rise: more people, more deaths. In fact, annual deaths in the United States are expected to rise to 3.2 million in 2030 from 2.6 million in 2010.

So there is the obvious downside – none of us gets out alive. There is also an upside in that more of us departing creates an investment opportunity. Money will be made attending to the dearly departed and their survivors’ needs.

The problem is there aren’t a lot of investment options: Most funeral homes and cemeteries are privately owned. What’s more, there are only a few publicly traded death-care firms, which became even fewer when Service Corporation International (NYSE: SCI) announced it would acquire Stewart Enterprises (NASDAQ: STEI) in a $1.13 billion deal to create the country’s largest funeral-home operator.

Basically, that leaves exchanged-traded options to the aforementioned Service Corp./Stewart Enterprises, Matthews International (NASDAQ: MATW), Carriage Services (NYSE: CSV), Hillenbrand (NYSE: HI), and StoneMor Partners (NYSE: STON).

That doesn’t leave much choice. And it leaves very little choice for investors who demand income and yield. Matthews, Carriage, Service Corp., and Stewart all yield less than 2%, while Hillenbrand yields just above 3%.

For income-and-yield investors, there’s really only one choice in death care – StoneMor Partners, which yields over 9%.

StoneMor is unique in that it’s formed as a partnership. As such, it enjoys a favorable tax structure in exchange for paying out the majority of its profits as distributions to its unit holders. That distribution amounts to $2.40 annually and is the principal reason StoneMor is a long-standing High Yield Wealth recommendation.

StoneMor is also unique in that it focuses on cemeteries. Indeed, it’s the second-largest owner and operator of cemeteries in the United States. As of 2012, it operated 276 cemeteries in 27 states and Puerto Rico. It also owned and operated 86 funeral homes in 18 states and Puerto Rico.

StoneMor has grown by exploiting the demographic trend and by acquiring private cemeteries and funeral homes. Back in 2006, it owned 177 cemeteries and 198 funeral homes. Revenue back then was $115 million; in 2012, it was $243 million. This year revenue is expected to grow to $253 million, and then grow to $267 million in 2014.

As growth in business operations and revenue has ratcheted up, so too has the distribution. Back in 2006, investors could expect a $0.47 quarterly distribution; today, it’s $0.60. What’s more, that distribution has been increased three of the past five quarters. I expect to see additional distribution increases in the near future.

Sure, death is certain. But there’s no need for income investors to unnecessarily fret, because StoneMor’s high-yield distribution is nearly as certain.

Published by Wyatt Investment Research at