I'm confused with this one. 5I considers PLC an Income stock, yet it has a yield of less than 2%. It is a perennial acquirer which I think of as a rollup strategy. If you look at it's 5 year stock performance, it is not impressive having reached $40+ and then tumbling back to 23 which is where it was 5 years ago. Admittedly, it is in a sector that will always have market demand, but other than that, what is the attraction?
PLC has been a 'growth' story for several years. We like it for income more than growth, given the overall history of the death care industry. The yield of 2% is still fairly attractive to many, in addition to price return. The valuation here has shifted due to high debt levels and rising interest rates in addition to a normalization in mortality rates post pandemic. Companies in the death care industry tend to carry leveraged balance sheet and PLC's cash flow profile can sufficiently support it currently. The driving catalyst here would the acquisition offer made to Carriage Services, one of its largest competitors. Not only is PLC in an industry which will always be in demand, but also it is a proven track record as a consolidator. This year has been disappointing, but we are comfortable with the outlook and the consistency of cash flows.