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6 retirement village operators for your watchlist

With the average life expectancy in Australia at 82 years and the median age at 37 years, it’s easy to see that Australia is an aging population. An aging population brings with it all sorts of issues and pressures; for investors it also brings opportunities. These investment opportunities aren’t limited to Australia either, with numerous countries, including our neighbour New Zealand, also dealing with aging populations.

It is generally preferable to invest in companies operating in industries that are enjoying the benefit of a tailwind. A tailwind can make a company’s (and an investor’s) life a whole lot easier than battling a headwind. The retirement industry is one sector that can offer investors a tailwind. With only a handful of listed stocks that offer the opportunity for shareholders to participate in the retirement village industry, the following may be worth further analysis.

Summerset (ASX: SNZ) is a NZ-based retirement village developer and operator with a market capitalisation of NZ$650 million. It has been listed on the NZ stock exchange since 2011 but in the interests of increasing its liquidity, last week Summerset listed on the ASX as well.

Also heralding from NZ, the NZ$3.45 billion Ryman Healthcare (NZE: RYM) develops, owns and operates retirement villages, rest-homes and hospitals in both Australia and NZ. With the share price up 340% in five years, Ryman has drawn investors’ attention to the sector.

The follow two companies are significantly smaller than their NZ peers, however the Australian-based Ingenia Communities (ASX: INA) and Lifestyle Communities (ASX: LIC), which both own and run numerous villages, primarily in the Eastern states, appear to be on solid growth trajectories. They are also both trading close to their net tangible asset backing.

FKP Property (ASX: FKP) and Lend Lease (ASX: LLC) also have substantial presences in the retirement village space, however if investors are looking for direct exposure to the ageing theme, the diversified nature of FKP and Lend Lease is a dilutionary factor.

Foolish takeaway

Retirement villages in theory should have a reasonably steady earnings stream and in many cases are backed by property assets. When coupled with the potential for earnings growth from an ageing population, the possibility for steady and growing dividends to shareholders from retirement village operators looks appealing.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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