Park Lawn Corporation is a leading provider of funerals, cremations and cemeteries in Canada. The company provides funeral services, burial sites, memorials, burials, crypts, cremation, and after-death ceremonies as needed. It has two operating segments – the US (more than 80% of sales) and Canada (> 20%).
Park Lawn and its subsidiaries own and operate businesses such as cemeteries, crematoriums, funeral homes, chapels, planning offices, and a transfer service. Some of his companies are The Signature Group, Parkland Funeral Holdings, Citadel, Cress, Providence Funeral Homes, etc.
It owns 129 cemeteries, 125 funeral directors and ~ 40 crematoriums. Park Lawn is present in densely populated markets such as Toronto, Denver, St. Louis, Nashville, Houston, New York / New Jersey as well as Mississippi, Kentucky, North Carolina. It operates in five Canadian provinces and 15 US states.
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Sales growth & market presence
Park Lawn generates much of its revenue from funeral homes (~ 80%) and cemeteries (~ 20%). The company sells products and services both in advance (pre-need) and in the event of death (at-need). Approximately 65% of the cemetery business has been sold and 75% of the funeral home is in use.
As the fastest growing company in the industry in North America, Park Lawn has grown from six Toronto cemetery properties to a diverse portfolio of properties and companies operating across North America.
Park Lawn is growing both organically and through acquisitions. It is well positioned to meet the changing needs of its customers. The company introduces a new funeral and cemetery technology solution aimed at increasing margins and improving operational efficiency.
As a leader in North America’s after-life care industry, Park Lawn revenues have grown by 32% CAGR over the past decade. It also completed three previously announced transactions that strengthened its presence in the Wisconsin, North Carolina and Tennessee markets. The company reported year-over-year increases of 26% and 42% in first-quarter revenue and in AEBITDA.
Although COVID-19 restrictions are affecting funeral service revenues, the impact of the pandemic is showing signs of improvement in most Park Lawn markets. The company has also seen an increase in the number of families conducting pre-planning activities in both its funeral home and cemetery. PLC also signed an agreement to start construction on a new funeral home in Texas.
Park Lawn currently pays a monthly dividend of $ 0.038 per share. The company has been paying dividends every month since January 2011. Park Lawn has a 48% payout ratio and a modest 1.4% yield.
Park Lawn’s annual dividend per share has fallen from $ 0.66 in 2010 to $ 0.46 today, despite earnings per share growing 25% CAGR over the past three years.
Park Lawn operates in an industry characterized by high barriers to entry such as government regulations and building permits. The after-life care industry is recession-proof and cremation rates are increasing in North America compared to traditional burials.
As the baby boomer generation ages, the death rate is projected to rise to 9.7 deaths per 1,000 in 2045. The industry is projected to reach $ 3.3 billion in Canada by 2024. Pre-negotiated funeral contracts are currently valued at $ 1.1 billion. In addition, pre-need contracts are usually fixed price agreements between the company and its customers.
Park Lawn is well positioned to benefit from the favorable population demographics that are being driven by the aging of baby boomers born between 1946 and 1964. It is also researching EasyCremation, which offers a cremation alternative for consumers who are reluctant to go with its branded stores.
The company targets adjusted EBITDA of $ 100 million by 2022 through strategic add-on acquisitions (~ $ 35 million), organic growth ($ 10 million to $ 12 million), and margin expansion ($ 7 million to $ 8 million). Last year, $ 100 million was spent on acquisitions. The acquisitions of West Funeral Home & Memorial Park and Williams Funeral Homes & Polk Memorial Gardens are expected to drive EBITDA growth in the future.
The death care industry in North America is a highly fragmented market with numerous bolt-on opportunities and is currently valued at $ 20 billion.
Park Lawn competes with companies like Service Corp. International, Foundation Partners, Carriage Services, Northstar Memorial Group, Independent Operators, Newcomer Funeral Service and other regional consolidators. Independent Operators is one of its biggest competitors, operating nearly 89% of funeral homes in the US and Canada.
However, its low debt, strong balance sheet, and appetite for acquisitions give Park Lawn an edge over the competition. It is the # 1 cremation in Toronto, performing more than 50% of the cremations performed in the market.
Park Lawn is an extremely defensive and recession-resistant company. The company continues to expand its business through opportunities in key markets.
Aging populations across North America offer the company a favorable demographic advantage and plans to continue its acquisition growth strategy through a robust M&A pipeline and strong balance sheet. Organic initiatives such as building new funeral homes and optimizing product and service offerings should continue to open up additional sources of income.
Park Lawn is a fast growing company with solid foundations and a broad competitive advantage. While the company’s dividend yield is modest, it can boast a long history of dividend payments.
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