If you’re building a portfolio to position yourself for a comfortable retirement it’s highly likely that investment traits such as defensive, quality, reliability, and franked income all play an important part in your stock-picking, decision making process.
It’s for these very reasons that blue-chip stocks such as Telstra Corporation Ltd (ASX: TLS) and Woolworths Limited (ASX: WOW) with their wide customer bases, solid balance sheets, market-leading positions and reliable, maintainable dividend payments are so incredibly popular.
These same traits are also on display at the out-of-the-spotlight $1.1 billion funeral services provider Invocare Limited (ASX: IVC). As the leading domestic provider of funeral services, Invocare is in a strong position to keep growing its footprint in the Australian market as well as in the markets of New Zealand and Singapore where it also has an established presence. Given the company’s smaller size, it’s highly likely that it can grow its earnings at a faster rate than large blue-chips such as Telstra and Woolworths.
As morbid as it may sound, the reliability of Invocare’s revenue base is as close to guaranteed as it comes. This solid revenue stream in turn creates a defensive earnings base which allows for predictable dividends to be forecast – this is of course important for retirees and income-seeking investors.
Based on consensus forecasts provided by Morningstar, Invocare will pay a dividend of 39.3 cents per share (cps) in FY 2015, rising to 42.8 cps in FY 2016. With the shares currently trading at $10.30 this implies a yield of 3.8% and 4.1% respectively.
Invocare’s forecast earnings growth is equally appealing with earnings per share rising from 47.2 cps to 51.8 cps. This growth highlights the consolidation opportunities and pricing power inherent in the business.
Where to invest $1,000 right now
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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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