Back in the summer of 2017, I’d discussed the impact of Canada’s aging population. This is a trend that is present across the developed world, one that will emerge as one of the great challenges of our time for political leaders. Indeed, changing demographics have the potential to be a destabilizing economic and social force going forward.
Aging demographics will also shape the growth trajectory of several key industries. According to a report from the think tank McKinsey & Company, revenues for the private healthcare insurance market are expected to double by 2025. The industry is worth $1.5 trillion today. The life insurance industry has a lower penetration as a percentage of GDP in Canada, according to McKinsey & Company. That does not mean investors cannot look elsewhere.
Today we are going to review two stocks that hold huge potential due to current demographic trends. TFSA investors with a long-time horizon should consider these equities in late 2018 and early 2019. Both stocks also provide a solid mix of growth and income.
Park Lawn (TSX:PLC)
Park Lawn is a Toronto-based company that provides goods and services associated with the disposition and memorialization of remains in Canada and the United States. Shares of Park Lawn were down 9.1% over the past three months as of close on December 20. The stock was still up 2.5% in 2018.
The company released its third-quarter results on November 13. Revenue surged 92.9% year over year to $43.2 million and adjusted net earnings soared 103.2% to $4.5 million. Park Lawn is well positioned to fuel growth through acquisitions going forward. Its two main competitors, Arbor Memorial and Service Corp., are facing obstacles that give Park Lawn a distinct advantage in the bid process.
Park Lawn announced a December dividend of $0.038 per share this past week. This represents a 1.9% yield. Shares have climbed over 170% over the past five years, so Park Lawn boasts top-shelf growth to back up its modest income.
Sienna Senior Living (TSX:SIA)
Sienna Senior Living is a seniors’ housing and long-term care operator in Ontario. Shares have dropped 11.3% in 2018 as of close on December 20. The company has made progress in lowering its debt-to-gross book value and earnings have been solid. Nevertheless, the stock has failed to pick up momentum throughout the year.
Sienna released its third-quarter results on November 14. Revenue rose 18% year over year to $165 million and net operating income climbed 31.7% to $40.5 million. For the first nine months of 2018, revenue has climbed 14.9% to $472.5 million. Net income has been nearly halved largely due to acquisition expenses in Q1 2018 and due to incremental interest expense.
Sienna stock is now hovering around a 52-week low as we head into the final week of December. The stock held an RSI of 37 as of close on December 20. Value investors may find Sienna particularly attractive considering the income it offers. The company increased its monthly dividend by 2% in Q3 to $0.0765 per share, which represents an attractive 5.6% yield.
