Tuesday newspaper share tips: Advice for long-term investors in Dignity

They say there are two things you can’t avoid – death and taxes. One of those things is keeping Dignity shares an asset worth hanging on to according to The Telegraph’s Questor.

The funeral provider said in a trading statement on Monday it expects to outperform full-year earnings expectations “given the continued high number of deaths relative to 2014”. Revenue for the 39 weeks to 25 September was £227m, up from £196.4m, while the number of deaths in the period rose 9% to 446,000.

Questor noted there is still plenty of room for growth as it only provides funeral services for about a quarter of the UK. It completed the acquisition of 12 locations in July for £10.9m ,and the majority of funeral parlours are still independent.

It also highlighted that the funeral operator likes to return the large amounts of cash it generates to investors.

“If investors had backed the £2.30 IPO price in 2004 they would have received £3.47 per share in cash, and would now hold shares that are worth £25.10. That is a total return of more than 1000%, or around 23% a year.”

Despite an expectation the death rate will fall next year, Questor said it’s still an excellent choice for long-term investors who have already got in as it offers a small but steady income, and rated it a share to hold on to.

The Times’ Tempus also highlighted the company’s success is not just due to the high death rate, but primarily because of its acquisitions and gains in market share. A new crematorium on the way in Derby will be another source of growth for the company.

However, the Times's investment column is taking different tack for those long-term investors who got in early, especially considering a dividend isn’t necessarily imminent.

“The shares, up 52p at £25.10, sell on more than 20 times’ next year’s earnings. The long-term story is still there, but those in since the start of the year, when the shares were below £20, might consider taking some profits.”