Mid-cap share tip of the week: Dignity

Mid-cap share tip of the week: Dignity

Funeral services provider Dignity has been a solid performer since the financial crisis and the signs are its stellar run is set to continue.

Over the past five years the firm has notched up a 63pc rise in its share price.

The company, which is Britain’s largest, and only listed, operator of funeral homes and crematoria, continues to benefit from modest rises in the number of deaths. In the first six months of the year there was a 5.6pc increase, which helped the firm’s pre-tax profits jump by more than 20pc to £33.1m over the period.

James Thomson, manager of the Rathbone Global Opportunities fund, is a big fan. He believes Dignity will continue to generate solid long-term returns and return cash to shareholders through dividends and one-off payments.

“There is greater than a one-in-10 chance that your funeral will be conducted by Dignity. It is a simple business, run by experienced management, who understand how to generate a long-term, healthy return, irrespective of the global economy,” said Mr Thomson.

“With a steady death rate, sensible acquisitions, modest price increases, and cheap debt funding, Dignity has averaged 13pc growth in earnings over the past five years, on a per-share basis. With the average price of a funeral now £2,500, more people are buying pre-arranged funeral plans, which should lock in future revenues.”

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