Longer lives, bigger profits: Why I'm bullish on GlaxoSmithKline plc, McCarthy and Stone plc and Carnival plc
Life expectancy has grown rapidly over recent decades. This is a good thing for us, of course, and it may also be good for our investments. Today, I'll be looking at three companies that are likely to benefit most.
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In need of a health kick?
People will always need medicine, especially as populations (particularly in developing markets) continue to grow and as developed world citizens live longer. With this in mind, adding a pharmaceutical giant to your portfolio may be a shrewd move.
GlaxoSmithKline (LSE:GSK) seems as good a candidate as any. Shares have disappointed over the last few years, dipping to 1,237p last September as a result of concerns surrounding the loss of profit-generating patents. Things now seem to be on the mend. The forthcoming departure of CEO Sir Andrew Witty and some positive figures in the April's Q1 earnings release has led analysts to start re-evaluating the company and its future prospects.
Glaxo's share currently trade at 1,410p. While not screamingly cheap with a P/E ratio of 16, the accompanying 80p per share dividend is a fairly decent sticking plaster for now. Although there have been concerns about Glaxo's ability to cover this payout, these should abate if the company can prove it's still on the road to recovery when it announces its Q2 results at the end of July.
Time to build a position?
Shares in retirement homes builder, McCarthy and Stone(LSE:MCS) have dropped rather heavily since their peak of 287p in January, perhaps more as a result of general market jitters and the forthcoming EU referendum than anything to do with the company itself. Indeed, the firm's first set of half-year results since returning to the market last August certainly gave investors reason for cheer.
Reporting a 33% rise in revenue, Chairman John Wright commented that the group had made "strong progress" towards its goal of building and selling more than 3,000 properties every year. Underlying profit before tax increased by 23% to £39.1m with legal completions up by 19% to 923 units. A 1p interim dividend may sound miserly compared to huge payouts offered by other housebuilders, but this dividend is expected to rise rapidly to 6.78p in 2017, covered over three times by earnings.
Having a 70% share in this niche market gives McCarthy and Stone a dominant position over competitors, something that may become even more apparent as a greater proportion of baby boomers downsize. A 26% jump in the order book from £243m to £306m in one year would appear to back this up.
Calm waters ahead
The imminent maiden voyage of the gigantic Harmony of the Seas cruise liner has made headlines this week. Cruises have appealed to those in retirement but the fact that people are now far more active in their senior years, and given that it's the fastest growing sector of the global tourism industry, would suggest companies like Carnival(LSE:CCL) will benefit massively now and in the future.
According to Stockopedia, the £27bn cap has a PEG ratio of 0.89 for the current year. Experienced investors will know that anything under 1 signals they're getting a lot of growth for their money. A dividend yield of just under 2.5%, while fairly average for a mature FTSE100 company, indicates the board is confident of profits being on a steady course.
Living longer makes it even more important to plan for those later, hopefully fun-filled years. The team at the Motley Fool agree. That's why they've produced a special report highlighting 5 shares to consider adding to your portfolio for your retirement. One of these has been covered above. What are the other four?
Click here to find out.
Paul Summers owns shares in GlaxoSmithKline and McCarthy and Stone. The Motley Fool has recommended shares in GlaxoSmithKline. We fools don't all hold the same views but we all believe that considering a diverse range of insights makes us better investors.
