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Dignity rewards shareholders

RESULTS: Funeral provider Dignity had a solid year and rewarded its shareholders with a juicy cash return
March 6, 2014

Strong cash generation allowed funeral services provider Dignity (DTY) to return yet another chunk of money to shareholders last year - the third such distribution since it listed a decade ago. The 108p a share payout last August, added to the final dividend of 11.83p, equates to a juicy 8 per cent yield.

IC TIP: Hold at 1502p
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The other big development last year was the acquisition of Yew Holdings in January 2013, which flattered Dignity's underlying operating profit, up 13 per cent at £78.4m. Yet higher income per funeral, cost control and top-notch client service also contributed to the outperformance, helping to offset a 1.1 per cent like-for-like fall in the number of funerals performed (despite an increase in the UK death rate). In fact, strip out acquisitions and profit in the funeral services division grew 6 per cent to £57.7m, while profit from the cremation division jumped 13 per cent to £26.4m.

Dignity also secured 39,000 new prearranged funeral plans. That brought the total to 323,000 by the year-end, representing a guaranteed future income stream. Meanwhile, the start to the current year has been quiet, with the number of deaths down 5 per cent. Peel Hunt nonetheless expects pre-tax profits of £56m, giving EPS of 80.9p (up from 72.1p).

DIGNITY (DTY)
ORD PRICE:1,502pMARKET VALUE:£802m
TOUCH:1,499-1,504p12-MONTH HIGH:1,570pLOW: 1,277p
DIVIDEND YIELD:0.8%PE RATIO:21
NET ASSET VALUE:79p*NET DEBT:£370m

Year to 27 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200918537.541.812.1
201019939.846.98.88
201121040.362.614.6
201223045.465.116.1
2013**25749.672.811.83
% change+12+9+12-27

Ex-div: 21 May

Payment: 27 Jun

*Includes intangible assets of £250m, or 469p a share

**Does not include return of cash of 108p a share paid in August 2013