There aren’t many things about the future that we know for sure. But one that’s basically inevitable is the growing number of older people in society, as the Baby Boomers reach their golden years.
If they set themselves up correctly, these companies could ride this wave over the coming decade and beyond…
Ramsay Health Care Limited (ASX: RHC)
The global hospital operator is out of favour at the moment on concerns of slowing growth, after it lowered guidance during the year, while still reporting a solid 7% growth in underlying profit.
More older people means more hospital visits, which Ramsay is certainly well placed to provide, with hospitals and day-surgery centres across Australia and overseas.
Shares could be good value right now, being 20% lower than earlier in the year. In the coming 12 months, Ramsay expects to add another 216 beds and 15 operating theatres.
The outlook for earnings is a little subdued in the short-term, but Ramsay is a quality business that will no doubt benefit from an ageing population requiring surgeries and hospital care.
Shares currently trade on a dividend yield of 2.6%, or 3.75% including franking credits.
Challenger Ltd (ASX: CGF)
Challenger specialises in financial products for those in retirement, namely annuities.
The company is seeing steady growth in net inflows to its business, with assets under management increasing by 16% in the recent year. Clearly not everyone is keen to have their nest egg exposed to the share market, which is great news for Challenger.
Right now, some older Australians are probably reconsidering their reliance on high-yielding shares like Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX:NAB). As such they might be looking for a guaranteed retirement income, which is where Challenger comes in.
It has also recently struck a deal with a Japanese insurer to sell its annuity products in Japan, which also has a large and ageing population. Challenger has a good reputation with advisers, being overwhelmingly rated as the leader in retirement products.
Both of these things should assist growth going forward.
Challenger is guiding for another 8%-12% growth in net profit for the coming year. Shares currently trade on a yield of 3.4%, or 4.85% including franking credits.
I think Challenger looks more attractive today, with good momentum in its business and a more appealing valuation. Each company certainly appears set to benefit from the ageing population trend.
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Motley Fool contributor Dave Gow owns shares of Challenger Limited and Ramsay Health Care Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.