The ASX dividend stock Propel Funeral Partners Ltd (ASX: PFP) has dropped 25% since its 2024 peak, which I think is a great entry point for investors. The chart below shows how the price has reduced.
Propel describes itself as the second largest provider of death care services in Australia and New Zealand. At the latest count, it operates from 205 locations, including 41 cremation facilities and nine cemeteries.
But, for a business like Propel, I think it has compelling long-term growth potential. Let's take a look at why the business is such an attractive ASX dividend stock.
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Long-term tailwinds
Due to Australia's growing and ageing population, Propel says that a step-change in future death volumes is expected.
According to Propel, the number of Australian deaths is expected to rise at a compound annual growth rate (CAGR) of 2.6% between 2025 to 2030 and then a CAGR of 2.9% between 2031 to 2040.
While that's not the strongest growth rate in the world, it does imply a steady growth rate for the ASX dividend stock in the coming years.
Rising prices and margins
But, it's not just the funeral volumes that can help drive the bottom line. The funeral price is regularly increasing, helping profit margins rise too.
Propel reports that its average revenue per funeral has increased at a compound annual growth rate of around 3.1% since FY15. In the FY25 first half, the business reported 2.6% comparable increase of the average revenue per funeral.
The business is also seeing the operating net profit after tax (NPAT) margin rising over time, where operating NPAT rises faster than revenue. We saw this in the FY25 half-year result, with revenue climbing 12% and operating NPAT rising 21.1% to $12.2 million.
Each revenue dollar becomes more valuable to the company (and investors) as the operating NPAT margin increases.
Pleasing dividend credentials
The ASX dividend stock has increased its annual dividend per share each year since FY21 – creating a pleasing dividend growth streak.
The FY25 interim dividend was hiked by 2.8% to 7.4 cents per share, taking the current grossed-up dividend yield to 4.6%, including franking credits.
While that's not the biggest dividend yield, I think it's a solid start and could grow significantly in the coming years, which is pleasing for a business in a defensive sector.
