The InvoCare Limited (ASX: IVC) share price has been a great performer over the last five years, growing by 89%. InvoCare is the largest operator of funerals and cemeteries in Australia.
I think there could be a lot more growth to come from InvoCare for the following reasons:
Defensive earnings
You know you have a defensive business when Benjamin Franklin made a famous quote about your industry.
The only things certain in life: death and taxes.
The sad reality is that a certain number of Australians do die every year and their families will probably want to hold a special funeral for them. This is a sizeable amount of almost guaranteed earnings with InvoCare having around a third of the market.
Growing industry
The death rate of Australia is expected to increase every year until 2034. This is due to Australians living longer and the ageing demographics.
This is a very strong tailwind for InvoCare to have and should provide ample opportunity for management to grow the business.
In the annual report to 31 December 2016 the business grew its revenue by 3.3% and its operating earnings per share by 11.8%. As the death rate quickens I imagine its earnings will grow at a faster rate too.
Strong dividend growth
The consistent growth of profit achieved by InvoCare has seen its dividend increase every year since 2006.
InvoCare is currently trading with a grossed-up dividend yield of 4.12% and increased its half-year dividend by 11.8% in its latest report.
Foolish takeaway
InvoCare could claim to be the most defensive business on the ASX. It's currently trading at 28x FY17's estimated earnings, this isn't cheap but I'm not sure the stock will ever be truly cheap with the tailwinds it has.
I would be a long-term buyer at today's prices, although hopefully I can buy more shares at a cheaper price in the future.
