Dividends by Death: Hillenbrand (HI)

There are few sure things in life: death and taxes. If one considers Hillenbrand (HI), one could possibly add dividends to that list.

The old saying goes that in life there are two certainties: death and taxes. The question is how does one benefit from death while still alive and kicking?
 
The answer comes in the form of industrial company Hillenbrand (HI) which owns the Batesville Casket Company.
 
Founded in 1906 Batesville is the market leader in the "death care" industry in the US. Anybody who has had to bury a loved one will know that death is not a cheap affair. Burial caskets, cremation caskets, containers and urns are all very real costs for those left behind.
 
In the US alone the industry is estimated to turnover $11 billion a year, and is quite immune to recession.
 
Unlike many other industries, death does not necessarily score from a focus on expansion and "growing the bottom line" - which means that cash generated in a year tends to be returned to shareholders consistently. Hillenbrand (HI) offers investors a 3.5% dividend yield and has paid a dividend every year since 1987.
 
The company has seen itself restructure in recent years. In 2008 it spun-off its medical devices business which now trades separately on the New York Stock Exchange under Hill-Rom Holdings (HRC) and in April 2010 Hillenbrand (HI) announced the purchase of material handling equipment giant K-Tron International for $435 million.
 
The K-Tron acquisition played a role in seeing the company announce its increase in earnings guidance for 2010 when the company delivered second quarter results in May. Revenue guidance for the year was up between $740 million and $770 million, up from $630 million and $670 million previously.
 
For the quarter net income came in at $29.4 million, a $1.6 million (5.8 percent) increase over the prior year, on the back of net revenue of $169.9 million. The company's gross profit margin for the quarter increased from 43.5% to 45.3% with cash flow from operations at $52.6m for the quarter - a healthy position to be in (pardon the pun).
 
Despite the second year of declining deaths and burial volumes in North America, the company continues to invest in new product development and to realize gains from the company-wide application of lean business practices.
 
For investors, death may well be termed a "recession-proof" industry. Irrespective of the economic climate, customers will continue to pass through on their way to "the other side". While there probably won't be too many earnings surprises, investors who are looking for a dividend yielding stock might want to consider tucking Hillenbrand (HI) into a dark little corner of their portfolio.

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